Copy of REEN COMBINATION MOCK 4: 30 QUESTIONS; 1 HOUR; 60% PASS MARK

John, the original owner, donated an endowment policy to his family Trust. At the time of the donation the value of the endowment was R 750 000. John had paid premiums of R 370 000 by the time he made the donation. Calculate, if any, the taxable capital gain or loss for John.

R 136 000
R 380 000
The gain or loss will be disregarded as the endowment is a personal use asset
R 61 200
R340 000

Can a Will which has been declared invalid, be condoned by the Master’s office?

Yes
No

Choose the correct statement with regards to Intestate Succession Act

Constitutional Court ruled that the definition of spouse in the Intestate Succession Act is unconstitutional. It is now deemed to have changed the Act and it must be read as all relationships deemed long term is spouse.
A long term relationship in a same sex union is not recognised as a spouse for Intestate Succession
A long term relationship in an opposite sex union is not recognised as a spouse for Intestate Succession.
Tenets of religion spouses were recognised as spouse until the court case Daniel vs Campbell changed the definition.

Jeremy bequeathed all his assets to trust for the benefit of his wife Jen and his 3 children who are all minors. Jeremy died in the current year of assessment. The trust is discretionary in nature. In the current year of assessment, the Trust generated the following income:

Rental R200 000

Interest R300 000

The trust chose to distribute R100 000 rental and R100 000 interest income to Jen and the children, in equal proportions.

(25 000 each in rental and R25 000 each interest)

The taxable income for each is as follows:

Select the correct statements:

A. Jeremy R200 000 rental and R300 000 interest less R23 800 exemption

B. Jen R25 000 rental and R1 200 net interest

C. Each child R25 000 rental and R1 200 net interest

D. The trust R100 000 rental and R200 000 interest

E. Jeremy R100 000 rental and R100 00 interest

A only
B, C, and D
B, C, D and E
C, D and E
E only
B and C

A Testator is required to nominate a recipient (beneficiary) of the proceeds of a life insurance policy, in his Will. Select the incorrect statement.

A life insurance policy will not pay out according to the stipulations in the will.
The insurance provider is obligated to pay the nominated beneficiary as provided for in the will of the deceased.
A beneficiary must be nominated, in writing, to the life insurance provider.
The insurance provider is obligated to pay the nominated beneficiary on the policy.

Where a spouse is a life assured on a risk policy (policy of insurance) and, on his death, the policy proceeds are paid to a nominated beneficiary, the value of the proceeds will not form part of the accrual system valuation.

Is this statement true or false

False
True

When an asset is donated, donation tax is paid by the donor. Part of the donation tax paid forms part of base cost for the donor.

Is this statement true or false

True
False

Peter, not married in community of property, donated a rental producing townhouse complex to his family trust. His two children (Jackie and Mikey) are the beneficiaries of the trust. Jackie is 18 and Mikey is 22-years old and working as a candidate attorney. During the current year of assessment the trust received R300 000 net rental income. The trustees exercised their discretion and distributed R100 000 to each beneficiary. No beneficiary has a vested right to retained amounts.

Determine who will be liable for income tax on the rentals received by and distributed by the trust.

Select the correct taxpayers of the above transaction.

Peter and Mikey
Peter and the Trust
Peter, Jackie and Mikey
Peter, Jackie, Mikey and the Trust

Where spouses are married with the accrual system applicable to their marriage and, who have excluded their retirement fund from the accrual valuation, they have effectively waived their entitlement to a divorce claim against the spouse’s retirement fund (pension interest)

Would this be correct?

Correct, they have waived their entitlement to claim
Incorrect, as all they have agreed to is to not include the value in the accrual
This is neither entirely true nor is it entirely false. They are no longer entitled to but can agree to share.

If capital losses for the year are greater than capital gains, the net loss may be offset against taxable income earned in the same year of assessment.

Is this statement true or false:

True
False

Couples who choose to marry in community of property, have the freedom to exclude certain assets from the communal estate.

Stated differently, couples married in community of property may exclude assets from the joint estate.

Is this correct or not?

Correct
Not correct

Should a couple elect to marry out of community of property, it will automatically exclude the accrual system unless explicitly included.

Is this statement accurate.

No the statement is not accurate
Yes it is accurate

Benny has an aunt that lives in the UK. Benny’s aunt has residential property in SA that she has been renting out. She has decided to donate the property
to Benny while she is still alive. The value of the property is currently R2 000 000.
Select the correct statement:

There is no donation tax payable at all
None of the above
Benny's aunt in the Uk has to pay donation tax of R380 000 as the property donated is situated in SA
Benny as the donee who is a resident in SA has to pay the donation tax of R380 000 on the property received

For a Will to be declared as valid, the following components must be present.

Select the correct statement:

It must be in writing, the witnesses have signed each page, the testator has signed only at the end thereof and, they have all signed in the presence of one another.
It must be in writing, the testator has signed the end of the will in the presence of more than 2 witnesses.
It must be in writing, signed on each page by the testator, in front of at least 2 witnesses, in the presence of the testator and each other.

Tammy set up a discretionary family trust 5 years ago. Tammy’s aunt donated R1 000 000 to the trust.

The trust deed provides for trustees to decide in whom they want to vest income and or assets of the trust. A clause does however give rights to the founder, Tammy, to revoke the right of any beneficiary to the income or assets of the trust when so awarded to them.

In this current year of assessment, the trustees decide to distribute income that the trust received as a result of the donation made by Tammy’s aunt. The trust received R150 000. All beneficiaries of the Trust are Tammy’s children. Distribution is made as follows:

To Gemma who is 15 years, an amount of R40 000

To John who is 10 years, an amount of R45 000

To Samantha who is 18 years, an amount of R50 000

Tammy exercises her right and revokes the decision to grant John R45 000 and confers this right to Gemma and Samantha who now receive an additional R22 500 each.

The taxable income of the various role players are: Select the correct statement.

Gemma: R62 500, Samantha R72 500, Trust: R15 000
Gemma: R40 000, Samantha: R50 000, Trust: R60 000
Gemma: R62 500, Samantha: R62 500, Tammy: R15 000
Gemma: R40 000, Samantha: R50 000, Tammy: R45 000 ; Tammy's aunt R15 000

One requirement for a valid will, is that all witnesses are required to sign each page and, in the presence of one another.

Is this statement true or false.

True
False

If the deceased dies intestate leaving a spouse and children (descendants), the spouse will inherit: Choose the correct option

R250 000 only.
The greater of R 125 000 or a child’s share.
A child’s share only
The greater of R 250 000 or a child’s share.

Angelica is 72 years old & in love with a young 29 year old man. Angelica has accumulated a huge estate of wealth as a result of the previous deaths of 5 of her husbands. Her children are concerned that this young man is marrying her only for her money. To comfort her children, they entered into a legal contract ensuring that on her death, each child inherits R14 000 000 rand from her deceased estate. She has 3 children.
For the purpose of this question, assume that the only asset in Angelica’s estate is R42 000 000 which includes the amounts above and, that her predeceased husbands left their entire estate to her in their individual wills.

Select the correct statement.

There is no duty and there is no donation tax. R42 000 000 will be property for estate duty but, because of the legal agreement, the 3 children are creditors of the estate and there a debt to pay so it will be a deduction resulting in no estate duty
This was a donation while she was alive and therefore no longer property on her estate. Duty will only be paid on amounts that she currently owns.
This was not a donation at the time of the agreement and therefore no donation tax was paid. The children are creditors of the estate but it is not allowed as a deduction. The estate duty payable is R 7 250 000.
Angelica would have paid an amount of R 8 380 000 donations tax when the agreement was signed and these amounts would not form part of estate duty
A correct statement cannot be found.

Tom was one of the witnesses to Bob’s Will. Bob has a provision in his Will which benefits Samantha. Samantha, at the time that Bob executed the Will, was Tom’s spouse. Samantha and Tom have subsequently divorced.

Select the correct statement:

Samantha will inherit if she can prove that Tom did not unduly influence Bob
Samantha will still be qualified to inherit.
Samantha will inherit if she can prove she did not unduly influence Bob.
Samantha will not be qualified to inherit.

The fact that the person who signed as a witness, also benefits from the estate, renders the Will:-Select the correct option.

The Will will be invalid
The will is valid and witness will inherit
The will is valid but the witness will be disqualified from inheriting
None of the above statements are correct
The will is partially valid and the inheritance devolving upon the witness will be distributed as per intestate law.

Ben and Jen are married in community of property. Ben has decided to change a beneficiary nomination on one of the life insurance policies

with Liberty Life. Ben may make this nomination without involving Jen in the process as her consent is not required.

Is this statement true or false.

True in relation to the court case Discovery v Naidoo even though this is not recommended as many believe it to be the wrong interpretation.
False in relation to the court case Discovery v Naidoo who clearly ruled that it is a requirement that the surviving spouse must consent.

One requirement for a valid will, is that all witnesses are required to sign the last page at the end thereof and the testator must sign each page anywhere on the page.

Is this correct?

This is incorrect – testator must sign on each page at the end thereof.
This is a correct statement

Where assets, which were specifically excluded from the accrual valuation, are replaced, the replacement assets are automatically included in the accrual valuation in the event of a death or divorce of one of the spouses.

Is this statement true or false.

True
False

Where the deceased was married with the accrual system applicable to their marriage, the accrual claim takes precedent to any bequests as well as residual heirs. Indicate which option completes the above statement.

The accrual claim has the same rights as the creditors of the estate but comes second to the creditors.
The accrual claim is second to creditors of the estate.
The accrual claim takes precedent to creditors of the estate.

Where the testator / deceased was married with the Accrual included, the accrual claim takes precedent to any bequests as well as residual heirs. Indicate which option completes the above statement.

The accrual claim has the same rights as the creditors of the estate but comes second to the creditors but before any bequests and residual heir
The accrual claim has the same rights as the creditors although second and then third to bequests but before residual heirs
The accrual claim takes precedent to creditors of the estate as well as to residual heirs but before any special bequests.

Obsolute incompetence is where one cannot marry at all.

False – one need to be competent to marry as long as one is above the age of 18.
True – as there are basic common requirements for marriage such as the mental capacity to understand what one is entering into.

Tom and Jane divorced 8 months ago. Amongst other assets, the court order awarded a policy, which is owned by Tom who is also the life assured. The reason for this award was to ensure that Jane had funds for her own maintenance in the event of Tom’s untimely death.

The life cover amount at the time of the cession was R5 000 000. Premiums paid by Tom over the term of the policy amounted to R 52 000.

Select the correct statement.

Jane will have a capital gain when the policy is payable on Tom's death,
There is no capital gain tax exemption that will be available when the proceeds are paid on Tom's death
The cession, which is a disposal, from Tom to Jane, is not taxable as this is a roll over to his spouse.
Tom has a capital gain to account for amounting to R4 948 000
There is no correct statement

Bob has a provision in his Will which benefits Samantha. Samantha, at the time that Bob executed the Will, was Tom’ spouse. Samantha and Tom have subsequently divorced. Tom was one of the witnesses to Bob’s Will.

Select the correct statement:

Samantha will not be qualified to inherit.
Samantha will inherit if she can prove that Tom did not unduly influence Bob
Samantha will still be qualified to inherit.
Samantha will inherit if she can prove she did not unduly influence Bob.

Bob has a provision in his Will which obligates him to take out a life insurance policy to the value of R5 000 000 payable to Samantha on his death or disability which ever comes first. Bob implements this policy and 3 years later becomes disabled. Bob has paid all the premiums on the policy. The proceeds paid to Samantha will have the following tax implications:

Select the correct statement.

The policy will not be exempt for capital gain tax and Samantha will be liable for the tax.
The gain must be disregarded as it is a risk only policy
The policy will not be exempt for capital gain tax and Bob will be liable for the tax
The policy will not be exempt for capital gain tax and Samantha will have to pay on the amount less premiums paid by Bob

Gim dies and the executor has included, in Gim’s estate duty calculation, an amount of R312 000 which were contributions that had all been made after 1 March 2016. This amount of R312 000 was used to reduce a taxable lump sum of R320 000 which Gim’s beneficiaries cashed in. The amount to be included for estate duty purposes is: Choose the correct amount.

R312,000
R0
R320 000
R8,000

Copy of REEN COMBINATION MOCK 4: 30 QUESTIONS; 1 HOUR; 60% PASS MARK

Copy of REEN COMBINATION MOCK 4: 30 QUESTIONS; 1 HOUR; 60% PASS MARK

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