Solution
Advice regarding the normal tax implications stemming from the income earned
by the trust
In order to provide a comprehensive answer to the question, let's break down the
scenario and discuss the tax implications for The Wasp Family Trust based on the
provided information.
1. Taxable Income and Expenditure:
The trust has earned income from various sources, including interest, dividends, and
rental income. This income is considered taxable in South Africa, as it is local source
income. The trust is also entitled to deduct legitimate expenditure incurred in generating
the income, which reduces its taxable income.
2. Accumulation and Distribution:
The trust deed stipulates that all income will be accumulated equally for the benefit of
the beneficiaries, and any undistributed amount will be included in their respective
estates. However, the trustees have discretion in determining the annual cash
distributions to each beneficiary. It's important to note that the accumulation of income
doesn't exempt the trust from paying tax on that income.
3. Beneficiaries:
The beneficiaries of the trust include:
Abel (22 years old, resident in Australia, not a resident for South African tax
purposes)
Annie (minor, resident in South Africa)
Albert (minor, resident in South Africa)
4. Tax Implications:
Tax on Accumulated Income: Since the trust earns income from various
sources, including interest, dividends, and rental income, it will be subject to
South African income tax on its total taxable income. The trust's taxable income
Advice regarding the normal tax implications stemming from the income earned
by the trust
In order to provide a comprehensive answer to the question, let's break down the
scenario and discuss the tax implications for The Wasp Family Trust based on the
provided information.
1. Taxable Income and Expenditure:
The trust has earned income from various sources, including interest, dividends, and
rental income. This income is considered taxable in South Africa, as it is local source
income. The trust is also entitled to deduct legitimate expenditure incurred in generating
the income, which reduces its taxable income.
2. Accumulation and Distribution:
The trust deed stipulates that all income will be accumulated equally for the benefit of
the beneficiaries, and any undistributed amount will be included in their respective
estates. However, the trustees have discretion in determining the annual cash
distributions to each beneficiary. It's important to note that the accumulation of income
doesn't exempt the trust from paying tax on that income.
3. Beneficiaries:
The beneficiaries of the trust include:
Abel (22 years old, resident in Australia, not a resident for South African tax
purposes)
Annie (minor, resident in South Africa)
Albert (minor, resident in South Africa)
4. Tax Implications:
Tax on Accumulated Income: Since the trust earns income from various
sources, including interest, dividends, and rental income, it will be subject to
South African income tax on its total taxable income. The trust's taxable income
