The directors of PLC $($Pty$)$ Limited inform you that at their last meeting they agreed to take out a keyperson policy on the life of one of the companys directors Mpho who is a high specialised IT professional. Mpho was present at the meeting and voted in favour of the decision. The directors provide you with the following instructions:

They want the policy premiums to be tax deductible in terms of Section $11($w$)$ of the Income Tax Act.

They want Mpho to own $40\%$ of the policy. The company will own the remaining $60\%.$

They want $40\%$ of the policy proceeds to be paid to Mphos family in the event of his death.

They want $60\%$ of the policy proceeds to be paid to the company.

Since $40\%$ of the proceeds of the policy will be paid to his family, Mpho will pay $40\%$ of the policy premiums.

They estimate that R$5$ million life cover will suffice.

Questions:

$2\mathrm{.}1$ Analyse the directors instructions and identify any potential income tax and estate duty risks which could arise if the policy is implemented according to the directors instructions $(8)$

$2\mathrm{.}2$ Calculate the total cover that the directors will require in order to make provision for the estate duty risks you have identified above. $(2)$