Question
QUESTION 9 Clarence is an 80-year-old fisherman. The fishing business is currently in his name. For the year ended 30 June 2020 the business was
QUESTION 9
Clarence is an 80-year-old fisherman. The fishing business is currently in his name. For the year ended 30 June 2020 the business was extremely profitable deriving a taxable income of $1,200,000. The boats and other assets are currently in Clarences name and he would like to plan for his retirement. Clarence has two children John and Brett. Clarence decides to put the assets into the Clarence Family Discretionary Trust with the John Family Trust and Brett Family Trust as beneficiaries. This means the net income of the Clarence family trust will be split between the two family trusts.
REQUIRED
Clarence seeks your advice on whether:
- Part IVA of the Income Tax Assessment Act 1936 would apply to this arrangement?
Make sure that you explain your answer.
- If Part IVA does apply, explain to Clarence what the consequences would be.
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