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Question 3 [ 3 0 Marks ] During January 2 0 2 2 Elia Mads ( 5 1 years old ) created a trust in

Question 3
[30 Marks]
During January 2022 Elia Mads (51 years old) created a trust in in favour of his three children, Kenneth, Owen, and
Steven. Kenneth is a 29-year-old medical doctor in Johannesburg. Owen turned 18 on 1 December 2022, and Steven is
15 years old and still attending school.
The trust assets consist of a flat with a market value of R2000000, and a local portfolio with a market value of R1500000.
Both these assets were donated to the trust by Elia. Elia's brother Will (54 years old), who is a bachelor, donated
R1000000 invested in 5% bonds issued by a local bank, to the trust.
The trust deed includes the following provisions amongst others:
(1) An annuity of R30000(R2500 per month) shall be pain to Kenneth.
(2) The trustees may make payments to the children for education and /or maintenance. All payments should be
funded pro rata from the current year's income and, apart from those mentioned in (4), no payment should be
made of the accumulated funds.
(3) The trustees, who are independent, must be remunerated at 5% of the trust's net income, before any distributions
to the beneficiaries.
(4) The trust will be wound up when Steven reaches the age of 25 years. The accumulated funds as well as the
capital in respect of the shares and the flat will be shared equally between the three children. The accumulated
funds as well as the capital in respect of the bonds will be paid to Owen.
The following information conditions apply:
If Kenneth decides to leave the Republic in search of greener pastures, his share will go to the other two brothers
in equal shares.
If Kenneth or Steven should die before Steven attain the age 25 years, that child's portion will go to the other two
brothers in equal shares.
If Owen should die before Steven attains 25 years, his share of any accumulated funds as well as the capital in
respect of the bonds will be paid to his estate.
Note: Owen therefore has a 100% vested right in the accumulated interest and a one-third vested right in the accumulated
dividends and rentals. Neither Kenneth nor Steven has any vested rights in any accumulated income.
The receipts and accruals accrued evenly throughout the year. The distribution to Owen took place on 1 September 2022
(while Owen was still a minor), and the education fees of Owen and Steven were paid on 15 January 2023(after Owen
became a major).
The following is the statement of receipts and accruals and payments of the trust for the 2023 year of assessment:
YOU ARE REQUIRED TO calculate the taxable income of each of the taxpayer as a result of the income / accruals of
the trust during the 2023 year of assessment.
END OF PAPER

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