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Wishnia's Word


December 2012

So here we are again in the middle of the year and we all seem to be so hectic that the clock seems to be ticking faster! Please set aside at least 1.5 hours per year for us to meet to review your financial planning in order for you to be able to make informed financial decisions that impact your life goals. It is very important for us to meet and review the suitability of your risk cover and the performance and tracking of your investments to be in line with your goals and possible changing circumstances and needs.

Trusts

I often get asked questions regarding who will be taxed on the income from trusts, so here is an example of a scenario.

Example Mr X donates an amount of R300 000 to a trust. The trust earns interest of R28 000 on this amount. The trust has five beneficiaries and the trustees have discretion whether and to whom any income distributions should be made. The trustees decide to accumulate the income in the trust and not to make any distribution. Who will be taxed?

Solution Section 25B would, in the absence of any deeming provision, cause the amount to be taxed in the hands of the trust.

However, the section 7 anti-avoidance provisions override section 25B.

A donor (Mr X) donated money to a trust. The trust has earned interest on this donation. The direct cause of the interest income was therefore a donation made by Mr X.

The income is accumulated in the trust/retained in the trust and will be only distributed upon the happening of some event, namely the exercise by the trustees of their discretion.

The R28 000 is deemed to be taxable in Mr X's hands in terms of section 7(5).

Network Corner

Kerston Foods Food Distributors
Richard Kershaw
021 5517258

Black Angus Restaurant Delicious Meals
Sebastian Schreuder
021 5517776

West Coast Clutch & Brake Brake & Clutch Specialists
Errol/Juanita Truter
021 5529280

Better Build For all your building needs
Howard Shagom
021 5528800

Royston Benjamin Tax Consultant CA (SA)
Royston@tmcaccountants.co.za

Thank you for your valued support

My business has been built on your referrals and your continued support will be greatly appreciated.
Remember time in the market is more important than trying to time the market!

Cheers
Stephen

P.S. Welcome back from maternity leave Nicky!

 



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