Question

On 1 March 2023, Jane donates a block of flats to the Jane Trust, a discretionary inter vivos trust. In the 2023/2024 year of assessment, the trust receives rental income in the amount of R1 000 000 in respect of the block of flats. The R1 000 000 rental income is dealt with as follows by the trustees of the trust:

(i) R100 000 is vested in Jane.
(ii) R200 000 is vested in Jane’s son Shaun, aged 12.
(iii) R300 000 is vested in Jane’s daughter, Alice, aged 19.
(iv) R400 000 is retained in the trust.
Which one of the following statements is correct?
a.R100 000 will be taxed in Jane’s hands, R200 000 in Shaun’s hands, R300 000 in Alice’s hands and R400 000 in the trust’s hands.b.R300 000 will be taxed in Jane’s hands, R300 000 in Alice’s hands and R400 000 in the trust’s hands.c.R700 000 will be taxed in Jane’s hands and R300 000 in Alice’s hands.d.R600 000 will be taxed in Jane’s hands, R200 000 and R400 000 in the trust’s hands.e.None of the above

Answer 1

The correct statement is:

d. R600 000 will be taxed in Jane's hands, R200 000 in Shaun's hands, and R400 000 in the trust's hands.

In this scenario, the rental income of R1 000 000 is vested or allocated to different beneficiaries of the trust. Jane receives R100 000, Shaun receives R200 000, Alice receives R300 000, and R400 000 is retained in the trust.

For tax purposes, the income allocated to each beneficiary is taxed in their respective hands. Therefore, Jane will be taxed on the amount vested in her (R100 000 + R500 000), which totals R600 000. Shaun will be taxed on the amount vested in him, which is R200 000. The remaining R400 000 is retained in the trust and will be taxed in the trust's hands.

Therefore, option d is the correct answer.

Step-by-step explanation:

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