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Tutorial 2 - Trust (Q)

This document provides information about a trust called Core Trust and its beneficiaries James and Jenny. It includes financial information for Core Trust for the year ended 31 December 2023 including business income, rental income, and expenses. It also provides additional information and requirements to calculate the tax liability of Core Trust and statutory income of James and Jenny under different assumptions.

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Xin Ru
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29 views3 pages

Tutorial 2 - Trust (Q)

This document provides information about a trust called Core Trust and its beneficiaries James and Jenny. It includes financial information for Core Trust for the year ended 31 December 2023 including business income, rental income, and expenses. It also provides additional information and requirements to calculate the tax liability of Core Trust and statutory income of James and Jenny under different assumptions.

Uploaded by

Xin Ru
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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BAX6433 Advanced Taxation_Trust

Tutorial 2
Lecture 2-Trust
Question 1

Core Trust (CT) is a trust body and its beneficiaries, James and Jenny, are Malaysian tax residents.
The financial information of CT for the year ended 31 December 2023 is as follows:

RM
Business income
Gross income 200,000
Less: Expenses (24,000)
Net income 176,000

Rental income
Gross income 30,000
Less: Expenses (6,000)
Net income 24,000

Additional information:
 Included in the business expenses is capital expenditure of RM10,000.
 Rental expenses include capital expenditure of RM2,000.
 Unabsorbed business loss from the previous year of assessment (YA) is RM2,000.
 Approved donation for the year is RM1,500.
 The annuity payable for the year is RM22,500.

Required:

a. Calculate the tax liability of CT for YA2023.

b. Assume that CT is a non-discretionary trust. In respect to the first three months, James and Jenny
are entitled to one-third and two-third of the total income respectively. The total income is to be
equally shared for the remaining months. Compute the statutory income of James and Jenny for
YA2023.

c. Assume that CT is a discretionary trust. During the year, James and Jenny had respectively
received Malaysian derived income of RM150,000 and RM100,000 from the trust. Compute the
statutory income of James and Jenny for YA2023.

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BAX6433 Advanced Taxation_Trust

d. Assume that CT is a discretionary trust. During the year, James and Jenny had respectively
received Malaysian derived income of RM70,000 and RM40,000 from the trust. Compute the
statutory income of James and Jenny for YA2023.

e. Assume that the trust has another beneficiary, Kelvin, in addition to the existing ones. James and
Jenny have an equal share of the trust’s total income after providing an accumulation amount of
RM20,000 per year to Kelvin. Kelvin is to be paid the accumulated amount only when he reaches
the age of 21 years old. Compute the statutory income of James, Jenny, and Kelvin for YA2023.

Question 2

Ahmad was a businessman carrying on a cement business. He passed away suddenly in 2023, 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 RM10,000 is to be
accumulated each year for the fourth child, now aged five years until the child reaches the age of 21
years old. Under the terms of the will, the widow is entitled to an annuity of RM60,000 per year.

Ahmad had investments which derived interest, dividend, and rental income. The details of the
business and the investment income for the year ended 31 December 2023 are as follows:

Business : 1 January 2023 - 31 December 2023


Gross income RM800,000
Allowable expenses 620,000
Capital allowance for the year 60,000
Balancing charge 3,000
Balancing allowance 26,000

Other income
Rental RM15,000
Dividend (Malaysia) [Note (i)] 10,000
Bank interest [Note (ii)] 5,000

Notes:
(i) The dividend was paid from an exempt income account and no tax has been deducted at its
source.

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BAX6433 Advanced Taxation_Trust

(ii) The interest income was derived from a fixed deposit account in a Malaysian bank.

During the year, the trust paid a cash donation of RM4,000 to an approved charitable institution and
RM2,000 to a poor relative of Ahmad.

Based on the trust’s distributable income of RM50,000 before accumulation, the trustee had made the
following payments to the beneficiaries for the year ended 31 December 2023:
 a sum of RM6,000 to the first child; and
 RM10,000 each to the second and third child.

The trustee had also incurred a management fee of RM1,000 during the year for executing and
administering the trust.

Required:

a. Compute the income tax payable of the trust for the Year of Assessment (YA) 2023, assuming
that Section 61(2) of the Income Tax Act 1967 (as amended) was applied.

b. Calculate the statutory income of each beneficiary for YA2023.

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