Question 1 (25 marks) Bonita family trust, a discretionary inter vivos trust, had the following assets: a flat (apartment) which was purchased at market value by the trust and a money market account which arose from a R1 200 000 donation from Mr Zwane (aged 59). The trust earned the following income in the year ended 28 February 2021: Rental income on flat R150 000 Interest income on the money market account R50 000 The following distributions were made to the beneficiaries (Mr Zwane's children) on 28 February 2021 Sinalo (aged 16): R70 000 Akhona (aged 26): R30 000 The remainder of the income was retained in the trust. MARKS YOU ARE REQUIRED TO: 1. 1 Calculate the trust's tax liability. 12 1.2 Calculate the amount of taxable income to be included in Sinalo's, Akhona's and Mr Zwane's taxable income as a result of the above transactions (assuming these 13 individual's had no other interest income). Question 2 (55 marks) Poloko (35 year-old) and Ayanda (32 year-old) are in an ordinary partnership and share profits and losses in 3:5 ratio respectively. Details of the year of assessment ending 28 February 2021 are as follow: 1. Service fee received amounted to R1 800 000 for the year of assessment 2. S11 (a) expenses (excluding salaries) amounted to R600 000 3. The following has been agreed to by the Partners: - Poloko shall only be entitled to a monthly salary of R20 000 from 30 June 2020. Poloko is a hard worker and because of that her contract was revied on 31 December 2020, it was agreed that as from 1 January 2021 she will received a 1.28% salary increase. Ayanda shall be entitled to a monthly salary of R22 000 during the financial year. Ayanda's contract will be revied on the 31 March 2021 with a possibility of 1.25% increment as from 1 April 2021. - Both partners have earned an interest of R12 000 each on the opening balance of their capital accounts. Partnership's contribution to pension fund for Poloko is R35 000, whilst Ayanda's amounted to R38 000. Polo decided to invest with BDV bank and she will receive a monthly interest of R1 380 from 01 September 2020. - Ayanda received a quarterly local dividend of R4 850. MARKS YOU ARE REQUIRED TO: 2. 1 Determine the taxable income of the partnership that will be split between Barry and Leroy. Show all your calculations 17 2. 2 Determine the taxable income for both Barry and Leroy for the year ended 28 February 2021. Show all your calculations. Please reference to the relevant sections of the Act and provide reasons for items with no tax impact. See 38 annexures for relevant tax tables. Question 3 (20 marks) Broad Waves (Pty) Ltd had an STC credit of R700 000 on 1 April 2013. It subsequently pays a dividend of R900 000 to its shareholders-Brown D (Ltd) (75% holding) (a resident company) and Mr Donal (25% holding) (a resident individual). MARKS YOU ARE REQUIRED TO: 3. 1 Calculate the amount subject to dividends tax for Brown D Ltd and Mr Donal. 9 8 3.2 List the steps that can be used to arrive at the value of an interest in property for donation purposes. 3.3 Define "Dividend" for the purpose of dividends tax. 3 ANNEXURE: RELEVANT TAX TABLES Tax Rebate Primary Secondary (65 and older) Tertiary (75 and older) Tax year 2021 R14 958 R8 199 R2 736 Local Dividend exemption: Local dividends received by or accrued to a taxpayer are fully exempt from normal tax in terms of section 10(1)(k)(i) of the Income Tax Act No. 58 of 1962 (the Act) Interest Exemption: Interest from a South African source earned by a natural person is exempt, per annum, up to an amount of: Person younger than 65 Person 65 and older 2021 R23 800 R34 500 Question 1 (25 marks) Bonita family trust, a discretionary inter vivos trust, had the following assets: a flat (apartment) which was purchased at market value by the trust and a money market account which arose from a R1 200 000 donation from Mr Zwane (aged 59). The trust earned the following income in the year ended 28 February 2021: Rental income on flat R150 000 Interest income on the money market account R50 000 The following distributions were made to the beneficiaries (Mr Zwane's children) on 28 February 2021 Sinalo (aged 16): R70 000 Akhona (aged 26): R30 000 The remainder of the income was retained in the trust. MARKS YOU ARE REQUIRED TO: 1. 1 Calculate the trust's tax liability. 12 1.2 Calculate the amount of taxable income to be included in Sinalo's, Akhona's and Mr Zwane's taxable income as a result of the above transactions (assuming these 13 individual's had no other interest income). Question 2 (55 marks) Poloko (35 year-old) and Ayanda (32 year-old) are in an ordinary partnership and share profits and losses in 3:5 ratio respectively. Details of the year of assessment ending 28 February 2021 are as follow: 1. Service fee received amounted to R1 800 000 for the year of assessment 2. S11 (a) expenses (excluding salaries) amounted to R600 000 3. The following has been agreed to by the Partners: - Poloko shall only be entitled to a monthly salary of R20 000 from 30 June 2020. Poloko is a hard worker and because of that her contract was revied on 31 December 2020, it was agreed that as from 1 January 2021 she will received a 1.28% salary increase. Ayanda shall be entitled to a monthly salary of R22 000 during the financial year. Ayanda's contract will be revied on the 31 March 2021 with a possibility of 1.25% increment as from 1 April 2021. - Both partners have earned an interest of R12 000 each on the opening balance of their capital accounts. Partnership's contribution to pension fund for Poloko is R35 000, whilst Ayanda's amounted to R38 000. Polo decided to invest with BDV bank and she will receive a monthly interest of R1 380 from 01 September 2020. - Ayanda received a quarterly local dividend of R4 850. MARKS YOU ARE REQUIRED TO: 2. 1 Determine the taxable income of the partnership that will be split between Barry and Leroy. Show all your calculations 17 2. 2 Determine the taxable income for both Barry and Leroy for the year ended 28 February 2021. Show all your calculations. Please reference to the relevant sections of the Act and provide reasons for items with no tax impact. See 38 annexures for relevant tax tables. Question 3 (20 marks) Broad Waves (Pty) Ltd had an STC credit of R700 000 on 1 April 2013. It subsequently pays a dividend of R900 000 to its shareholders-Brown D (Ltd) (75% holding) (a resident company) and Mr Donal (25% holding) (a resident individual). MARKS YOU ARE REQUIRED TO: 3. 1 Calculate the amount subject to dividends tax for Brown D Ltd and Mr Donal. 9 8 3.2 List the steps that can be used to arrive at the value of an interest in property for donation purposes. 3.3 Define "Dividend" for the purpose of dividends tax. 3 ANNEXURE: RELEVANT TAX TABLES Tax Rebate Primary Secondary (65 and older) Tertiary (75 and older) Tax year 2021 R14 958 R8 199 R2 736 Local Dividend exemption: Local dividends received by or accrued to a taxpayer are fully exempt from normal tax in terms of section 10(1)(k)(i) of the Income Tax Act No. 58 of 1962 (the Act) Interest Exemption: Interest from a South African source earned by a natural person is exempt, per annum, up to an amount of: Person younger than 65 Person 65 and older 2021 R23 800 R34 500