Ahmad was a businessman carrying on a cement business. He passed away suddenly in 2011, leaving behind his wife and four children.
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Ahmad was a businessman carrying on a cement business. He passed away suddenly in 2011, leaving behind his wife

and four children. Before his death, he had prepared a will in which his wife was named as the trustee and their four children as the beneficiaries.

 

He willed one half of the trust income to the first child at the discretion of the trustee. The balance will be distributed equally between the second and third child. A sum of RM 10,000 is to be accumulated each year for the fourth child, now aged five years until the child reaches the age of 18 years.

 

Under the terms of the will, the widow is entitled to an annuity of RM 60,000 per year.

 

Ahmad had investments from which are derived interest, dividend and rent. The details of the business and the investment income for the year ended 31 Mar 2018 are as follows:

 

Business : 1 April 2017 - 31 Mar 2018

 

RM

Gross income

 

 

 

 

800,000

Allowable expenses

 

 

 

 

620,000

Capital allowances due

 

 

 

60,000

Balancing charges

 

 

 

 

3,000

Balancing allowances

 

 

 

 

26,000

 

 

 

 

 

 

 

Other income

 

 

 

 

 

Rental

 

 

 

 

 

15,000

Dividends (Malaysia)

 

Note (i)

 

10,000

Bank interest

 

Note (ii)

 

5,000

 

 

 

 

 

 

Dividends (China)(remitted)

 

 

 

8,000

Notes:

 

i) The dividend is paid from a single tier account and no taxes were deducted at source.

ii) The interest income is derived from a fixed deposit with a Malaysian bank.

 

During the year, the trust paid a cash donation of RM 4,000 to an approved charitable institution and RM 2,000 to a poor relative of Ahmad.

 

Based on the trust distributable income of RM 50,000 before accumulation, the trustee made the following payments to the beneficiaries for the year ended 31 March 2018: a sum of RM 6,000 to the first child and RM 10,000 each to the second and third child.

 

The trustee also incurred management fee of RM 1,000 during the year for executing and administering the trust.

 

 

Required

Compute the chargeable income of the trust for the year of assessment 2018 assuming that section 61(2) of the Income Tax Act 1967 (as amended) was applied. S 61(2) - DG allow the beneficiary's share of income as a deduction from the trust total income to arrive at the chargeable income.

 

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