Susan Smith is the trustee of an Australian resident trust estate created by a Deed. She...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Susan Smith is the trustee of an Australian resident trust estate created by a Deed. She created the discretionary trust for the benefit of her unmarried daughters, Megan aged 19 years and Isabel aged 15 years. They are both residents of Australia. The following information indicates the trading activities of the trust for the 2020/21 income tax year. Receipts •Net income from trading activities $80,000 • Fully franked dividend received $25,000 • Proceeds from shares in Hub Ltd on 12 July 2020 $60 000. The shares were purchased in 2005 at a total cost of $20,000 •Rental income $65,000 Expenses • Interest paid on loan for rental property $40,000 • Expenses incurred in generating rental income $15,000 Megan derived a salary of $7,000 while working casually at McDonalds. Isabel received interest income of $2,000 from her savings account. Required Advise Susan and her daughters of the taxation implications of the following distribution options: (a) Susan distributes the trust net income to each beneficiary 50% each. (b) Susan distributes the net capital, the fully franked dividends and 25% of the trading and rental income to Isabel and the rest to Megan In your analysis you need to address the following points: • The name of the beneficiary; • • whether or not the beneficiary is presently entitled; whether or not the beneficiary is under a legal disability; which sections of the ITAA apply to make the income assessable; who is assessed on each amount; the tax rate applicable to each amount and the tax payable by the trustee and/or each beneficiary under each of the alternatives. You must provide relevant cases and/or legislation in support of your analysis. Susan Smith is the trustee of an Australian resident trust estate created by a Deed. She created the discretionary trust for the benefit of her unmarried daughters, Megan aged 19 years and Isabel aged 15 years. They are both residents of Australia. The following information indicates the trading activities of the trust for the 2020/21 income tax year. Receipts •Net income from trading activities $80,000 • Fully franked dividend received $25,000 • Proceeds from shares in Hub Ltd on 12 July 2020 $60 000. The shares were purchased in 2005 at a total cost of $20,000 •Rental income $65,000 Expenses • Interest paid on loan for rental property $40,000 • Expenses incurred in generating rental income $15,000 Megan derived a salary of $7,000 while working casually at McDonalds. Isabel received interest income of $2,000 from her savings account. Required Advise Susan and her daughters of the taxation implications of the following distribution options: (a) Susan distributes the trust net income to each beneficiary 50% each. (b) Susan distributes the net capital, the fully franked dividends and 25% of the trading and rental income to Isabel and the rest to Megan In your analysis you need to address the following points: • The name of the beneficiary; • • whether or not the beneficiary is presently entitled; whether or not the beneficiary is under a legal disability; which sections of the ITAA apply to make the income assessable; who is assessed on each amount; the tax rate applicable to each amount and the tax payable by the trustee and/or each beneficiary under each of the alternatives. You must provide relevant cases and/or legislation in support of your analysis.
Expert Answer:
Answer rating: 100% (QA)
a Distribution of Trust Net Income to Each Beneficiary 50 Each Beneficiaries Megan and Isabel Presently Entitled Megan and Isabel are presently entitl... View the full answer
Related Book For
Smith and Roberson Business Law
ISBN: 978-0538473637
15th Edition
Authors: Richard A. Mann, Barry S. Roberts
Posted Date:
Students also viewed these finance questions
-
Required information The following partially completed T-accounts summarize last year's transactions for Kelshaw Company: Raw Materials Beg Bal (1) 4,000 18,000 20,000 (2) Accounts Payable 18,000 (1)...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
1. What trade- offs are involved in deciding to have a single large, centrally located facility instead of several smaller, dispersed facilities? 2. Who needs to be involved in facility location...
-
The following is a list of balances in the general ledger of J. McKee at 30 June 20X3: Required a. Prepare a trial balance. b. The trial balance does not balance (on purpose). Which account is...
-
Refer to the information in QS 6-5 and assume the periodic inventory system is used. Determine the costs assigned to ending inventory when costs are assigned based on LIFO. (Round per unit costs to...
-
The following MINITAB output presents a multiple regression equation y = b0 + b1x1 + b2x2 + b3x3 + b4x4. It is desired to drop one of the explanatory variables. Which of the following is the most...
-
Identify at least two situations in which application of different accounting methods or accounting estimates results in difficulties in comparing companies.
-
Please compute for the following requirements and show solution in good accounting form so I can compare it with my own answer. Thank you! 1. Uncle Ben Corp. sells a product for P5 per unit. The...
-
What is the height of D ? B C I (H) D A I EF K J
-
Of the different theories of risk outlined, which theory of risk do you think has the most power in explaining everyday decision-making: expected utility theory, prospect theory or regret theory?
-
What is an information cascade and how does it link with Bayesian models of decision- making? Are information cascades rational?
-
What is the marketing exchange process, and why is the exchange process critical for sports marketers?
-
Discuss some of the ways that the sports marketing industry is growing?
-
From the different economists introduced, who do you think has had the most influence on modern behavioural economics and why?
-
Higher flotation costs will result in all of the following EXCEPT Select one: O a higher cost of retained earnings. O b. higher weighted average cost of capital. c. higher cost of common equity when...
-
A manufacturer can sell product 1 at a profit of $20 per unit and product 2 at a profit of $40 per unit. Three units of raw material are needed to manufacture one unit of product 1, and six units of...
-
Upon George Welchs death, he was survived by his second wife, Dorothy Welch, and his daughter by his first marriage, Patricia Fisher. At the time George and Dorothy were married, George was in very...
-
Albert Bennett, an amateur cyclist, participated in a bicycle race conducted by the United States Cycling Federation. During the race, Bennett was hit by an automobile. He claims that employees of...
-
[MGM and the other plaintiffsincluding the Recording Industry Association of America, the Motion Picture Association of America and a class of 27,000 music publishers and songwriters (MGM)brought...
-
Describe four analytical procedures that may be applied to long-term investments and intangibles.
-
State the objectives in the audit of long-term investments and intangibles.
-
What are some inquiries an auditor can make when examining the property and equipment account to add value to the audit?
Study smarter with the SolutionInn App