PoTL_2017_Chapter_20_Answers_(Final).docx - Principles of...

Info icon This preview shows pages 1–3. Sign up to view the full content.

Principles of Taxation Law 2017 Answers to Questions CHAPTER 20 — TRUSTS AND BENEFICIARIES Question 20.1 Why are discretionary trusts popular as a structure to protect assets and used extensively in estate planning? Answer The beneficiaries of a discretionary trust are not entitled to any assets of the trust. This means that if they become bankrupt, the asset in general could not be claimed by the trustee to be used to pay creditors. Question 20.2 The Li Family Trust is a discretionary family trust with two adult resident beneficiaries, Emma and Peter. During this income year, the activities of the trust gave rise to the following: $ Loss from rental property (6,000) Interest income from term deposits 4,000 Cash received from fully franked dividends 14,000 A capital gain from the sale of BHP shares that had been held for two years 10,000 The trustee of the trust resolved to distribute 100% of the trust income to Emma. Emma also has the following income: Salary of $200,000 from which PAYG withholding tax instalments of $60,000 have been deducted. Work-related expenses of $275. Emma has private hospital cover. Based on the facts above: 1 Calculate the taxable income and tax payable or refundable for Emma for the income year. 2 Would your answer differ if the Li Family Trust made a rental loss of $40,000? 1 © 2017 Thomson Reuters (Professional) Australia Limited
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Answer (1) Net income of the trust: interest income $4,000 Dividend 14,000 imputation credit ($14,000 x 30 / 70) 6,000 Capital gain (50% discount) 5,000 rental loss (6,000) 23,000 Taxable income of Emma: assessable income from trust: s 97 $23,000 salary ($200,000 + 60,000) 260,000 work-related expenses (275) 282,725 Tax liability 100,458.25 Add: Medicare levy 5,654.50 Less: PAYG withholding (60,000) imputation credit (6,000) Tax payable 40,112.75
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.
  • One '14
  • Progressive Tax, Taxation in the United States, beneficiary, Discretionary trust

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern