Pranab Trust is a resident discretionary inter-vivos trust carrying on hospitality trading activities. During the 2015/2016 income year the trust made a loss of $15,000 calculated in accordance with s 95(1) ITAA 1936. Pranab Trust has performed better in 2016/2017, with income of Pranab Trust comprising: Profit from the business activities $103,000 Interest on term deposit $7,000 Fully franked dividend (with imputation credit of $6,000) $14,000 During the 2016/2017 income year, tax deductible business expenses of $23,000 were incurred. The trustee has exercised discretion to make the following payments to beneficiaries who all have a vested interest in the income of the trust: Julia, aged 76, who suffers dementia and is currently in a mental institution, unable to give discharge to a legal contract 30% of trust net income Malcolm, aged 52 25% of trust net income Tony, aged 34 20% of trust net income Kevin, aged 12 10% of trust net income which is to be accumulated indefeasibly and paid at age 21. In the event of his death Kevins share will be paid to his estate. Any remaining income is to be retained in the trust for re-investment purposes. Question 4 continued over next page. Term 1 Standard Examination 2017 Taxation Law of Australia LAWS20060 Page 4 of 4 Question 4 continued. (a) Calculate the s 95(1) trust net income for 2016/2017. (5 marks) (b) Explain how the trust net income will be assessed in the 2016/2017 income year, making reference to whether assessment will be to the trustee and/or beneficiaries.