Copy of MOCK 3: 7 QUESTIONS 30 MINUTES 60% PASS MARK [Available]

Mr Petriangi made an interest free loan of R1 000 000 to the Petriangi Trust in 2019 year of assessment.  The market related interest rate on this loan would have been 10 %.  The Petriangi Trust is a discretionary South African trust.  The beneficiaries of this trust are Mr Petriangi’s children Tony Petriangi (aged 17) and Luigi Petriangi (aged 25).  The trust invested the money in South African shares.  In July 2023 the trust sold the shares and made a capital gain of R100 000.  This capital gain was distributed to the beneficiaries in equal shares. Who will be liable for the payment of the capital gains tax?

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Mr Brown made an interest free loan of R1 000 000 to the Brown Trust in 2017. The bank lending interest rate on this loan is 10% (now and then).  The Brown Trust is a discretionary South African inter vivos trust.  The beneficiaries of this trust are Mr Brown’s wife and children, Steven Brown (aged 17) and David Brown (aged 25).  David Brown has immigrated to Australia and is an Australian resident.  The trust invested the money in South African shares.  In 2018 year of assessment,  the trust sold a portion of the shares and made a capital gain of R300 000.  The capital gain was distributed to the beneficiaries in equal shares in 2018. In the current tax year of assessment, the trust received dividends of R 100 000 and also sold the remainder of the shares and made a capital gain of R200 000. The income as well as the capital gain was distributed to the beneficiaries in the current year of assessment. The persons liable for the payment of capital gain and income tax for the transactions that took place in the current tax year are:

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Simon Powell founded a trust by donating assets to trustees to be administered for the benefit of his minor grandson, Taylor, his major grandson, Tom, and his married granddaughter, Celia.  The trust deed provides that the trustees have discretionary powers with regard to distribution of income to the beneficiaries as they deem necessary.  The deed provides further that the remaining amount from the annual income is to be accumulated for the beneficiaries, but that they will be entitled to receive the income only on Simon’s death or when the beneficiaries reach the age of 30, whichever happens first.  If a beneficiary should die before attaining the age of 30, the other beneficiaries will proportionally be entitled to that amount.

 

During the year of assessment the trustees received a taxable income of R10 000 from the trust assets.  In terms of the discretion as per the trust deed they distributed  R1 000 to each  beneficiary and retained the balance in the trust.  Determine who is liable for tax on the R10 000 taxable income.