QUESTION 3. TRUST, PRESENTLY ENTITLED, LEGAL DISABILITY, IMPACT OF DEATH In July 2020, John creates a trust, leaving property in the trust for the benefit of his only brother, Jeremy - and his only child, James. The provisions of the trust deed require the trustee to distribute income as follows: Net Income of trust distributed o 60% to Jeremy (while living), o 10% to James, (while living), and o 30% to be accumulated for James (while living) until he turns 25. James is currently aged 15. John, Jack and James are residents. John's lawyer makes investments according to the terms of the trust deed. The trustee calculates the net income of the trust estate in 2020-2021 to be $100,000 REQUIRED Part 1 For the 2020-21 year of income, based on the trust deed provisions, discuss a) how Jeremy will be taxed b) how James will be taxed c) how the accumulated income will be taxed (4 marks) (4 marks) (4 marks) HINT: In your discussion, you should use 4 sub-headings for each of the 3 circumstances (that is Part 1, a,b & c) above, advising: 1) the amount of the share of the trust net income 2) the relevant taxing provisions 3) how the taxing provision applies in each circumstance 4) the relevant taxing rates that apply (You are not required to calculate the tax liability of the beneficiaries) (NB each sub-heading discussed is worth 1 mark) a) how Jeremy will be taxed b) how James will be taxed c) how the accumulated income will be taxed (4 marks) (4 marks) (4 marks) HINT: In your discussion, you should use 4 sub-headings for each of the 3 circumstances (that is Part 1, a,b & c) above, advising: 1) the amount of the share of the trust net income 2) the relevant taxing provisions 3) how the taxing provision applies in each circumstance 4) the relevant taxing rates that apply (You are not required to calculate the tax liability of the beneficiaries) (NB each sub-heading discussed is worth 1 mark) Part 2 Assume instead, that John died creating a trust under a will, with the same trust provisions as above. Advise whether the taxing of the 3 scenarios above differ and how. (3 marks) In your responses, ensure you state the appropriate legislation, tax rulings or common law cases to support your answer and calculations. (4+4+4+3 = 15 Marks) QUESTION 3. TRUST, PRESENTLY ENTITLED, LEGAL DISABILITY, IMPACT OF DEATH In July 2020, John creates a trust, leaving property in the trust for the benefit of his only brother, Jeremy - and his only child, James. The provisions of the trust deed require the trustee to distribute income as follows: Net Income of trust distributed o 60% to Jeremy (while living), o 10% to James, (while living), and o 30% to be accumulated for James (while living) until he turns 25. James is currently aged 15. John, Jack and James are residents. John's lawyer makes investments according to the terms of the trust deed. The trustee calculates the net income of the trust estate in 2020-2021 to be $100,000 REQUIRED Part 1 For the 2020-21 year of income, based on the trust deed provisions, discuss a) how Jeremy will be taxed b) how James will be taxed c) how the accumulated income will be taxed (4 marks) (4 marks) (4 marks) HINT: In your discussion, you should use 4 sub-headings for each of the 3 circumstances (that is Part 1, a,b & c) above, advising: 1) the amount of the share of the trust net income 2) the relevant taxing provisions 3) how the taxing provision applies in each circumstance 4) the relevant taxing rates that apply (You are not required to calculate the tax liability of the beneficiaries) (NB each sub-heading discussed is worth 1 mark) a) how Jeremy will be taxed b) how James will be taxed c) how the accumulated income will be taxed (4 marks) (4 marks) (4 marks) HINT: In your discussion, you should use 4 sub-headings for each of the 3 circumstances (that is Part 1, a,b & c) above, advising: 1) the amount of the share of the trust net income 2) the relevant taxing provisions 3) how the taxing provision applies in each circumstance 4) the relevant taxing rates that apply (You are not required to calculate the tax liability of the beneficiaries) (NB each sub-heading discussed is worth 1 mark) Part 2 Assume instead, that John died creating a trust under a will, with the same trust provisions as above. Advise whether the taxing of the 3 scenarios above differ and how. (3 marks) In your responses, ensure you state the appropriate legislation, tax rulings or common law cases to support your answer and calculations. (4+4+4+3 = 15 Marks)