Question Tag: Trust Income

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  • 15 Marks

TAX – May 2017 – L2 – SC – Q5 – Taxation of Trusts and Estates

Computation of assessable income for trust beneficiaries and net assessable income in the hands of the trustee.

Alhaji Oluwambe is the trustee of a Settlement created by late Chief Jongbo in favor of his four children, grandchildren, and others. He submitted the following information to Okun State Board of Internal Revenue for assessment purposes for the fiscal year ended December 31, 2014:

ii. Each beneficiary is entitled to 1/6 share of 1/3 of the distributable income.
iii. Capital allowance agreed with the tax authority was N7,350,000.

Required:

a. Compute the assessable income in the hands of each beneficiary. (14 Marks)
b. Determine the Net Assessable Income in the hands of the Trustee. (1 Mark)

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  • 20 Marks

TAX – May 2024 – L2 – SA – Q3 – Taxation of Non-Residents

Discuss significant economic presence in digital transactions and calculate the taxable income for Alhaji Yanko Abdulahi’s trust.

a. Section 6 (6A) of the Personal Income Tax Act Cap P8 LFN 2004, as amended by the Finance Act 2020, states that the Minister by Order can determine what constitutes the significant economic presence of a non-resident, executor, or trustee.

Required:
i. In relation to what constitutes a significant economic presence, discuss Digital transactions (4 Marks)
ii. Discuss Services (4 Marks)

b. Alhaji Yanko Abdulahi was a successful businessman in Kano before he died. He is survived by two children, Yahaya and Binta.

A trust was created for the benefit of his two children. The trustee’s records for the year ended December 31, 2021, revealed the following information:

Item Amount (N)
Rental income (gross) 2,400,000
Profit from trading activities 32,160,800
Interest received (gross) 840,000
Other income 630,500

Additional Information:

  • Yahaya is entitled to a fixed annuity of N148,000 per annum.
  • Allowance for trustee expenses: N62,000.
  • Capital allowance agreed with the Revenue: N1,260,000.
  • Trustee remuneration per trust deed:
    • Fixed – N25,000 per annum
    • Variable – 2% of computed income
  • Provision made for payment of N150,000 as discretionary payments to each child.
  • 60% of distributable income is shared between Yahaya and Binta in the ratio 55:45, respectively.

Required:
Compute the income of the trust assessable to tax in the hands of the trustee. (12 Marks)

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  • 15 Marks

TAX – Nov 2015 – L2 – Q7 – Taxation of Trusts and Estates

This question requires the computation of income tax payable by trustees and the amount due to beneficiaries from the settlement of Chief Sarki Oliver for the 2010 year of assessment.

Chief Sarki Oliver died peacefully in his sleep on 31 December 2009. He is survived by three children – Jimmy, Ngozi, and Charles. Two Trustees were appointed for the Settlement created in favor of the children to ensure that they were not badly affected by the demise of their father. Details presented by the two Trustees for the year ended 31 December 2010 are as follows:

Income N’000
Rental income (gross) 225,000
Trading income 250,000
Dividends (gross) 170,000
Interest on bank deposit 107,500
Sundry income 105,000
Total Income 857,500

Additional Information: (i) The Interest income is from Super Bank plc
(ii) Administrative and other expenses amounted to N32,000
(iii) Interest on debt repayment by the Settlement was N25,000
(iv) Fixed annuity to a beneficiary was N41,000 (Gross)
(v) Each beneficiary is entitled to 1/5 share of the net distributable income
(vi) Under the terms of the Trust Deed, the Trustees made discretionary payments to:

  • Jimmy N30,000
  • Ngozi N26,000
  • Charles N15,000
    (vii) Capital allowances – N64,000
    (viii) Trustees’ remuneration: Fixed amount of N25,000 each plus 2% of Computed Income
    (ix) The children have no other income.

In view of the recent agitation by the extended family members, you were contracted as
a consultant to compute the following:

Required:
a. Compute the income tax payable by the Trustees on the Trust income. (8 Marks)
b. Calculate the amount due to each beneficiary of the Settlement. (7 Marks)

 

 

 

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  • 10 Marks

TAX – May 2018 – L2 – Q6b – Taxation of Trusts and Estates

Compute the amounts due to beneficiaries from Mr. Salami's estate.

Compute the amount due to the beneficiaries for 2016 Year of Assessment.

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  • 10 Marks

AT – March 2023 – L3 – Q5a – Business income – Corporate income tax

Compute the income tax payable by the trustees of Randy Koomson’s trust for the 2021 year of assessment.

Randy Koomson, who hails from Cape Coast in the Central Region, died in January 2021 and left his businesses and estates with trustees, who happened to be non-residents. Randy Koomson has two children: Araba Koomson and Kwamina Koomson. These two children were made the beneficiaries, and each of them is entitled to 1/3 of the net distributable income of the trust with the rest for administrative expenses.

The terms of the trust deed provided for discretionary payments to the beneficiaries and donations towards worthwhile causes. During the year 2021, discretionary payments of GH¢300,000 each were made to the children.

Gross Profit, before discretionary payments and other expenses below, for the year 2021 was GH¢3,500,000.

The following expenses were incurred:

The Ghana Revenue Authority has agreed on a capital allowance of GH¢72,550.

Required:
Compute the income tax payable by the trustees on the income for the 2021 year of assessment. (10 marks)

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  • 20 Marks

AT – Nov 2023 – L3 – Q4 – Ethical principles in taxation

Compute the chargeable income and tax payable for Fenty Trust Ltd and outline the general tax rules on trusts and beneficiaries.

Fenty Trust Ltd is a non-resident company acting as the trustee for four resident Ghanaians, each holding a 22.5% share in the Trust. The Trust was set up on the instruction of Mr. Karl Odogo before he died. Mr. Karl Odogo was a businessman with interests in real estate, transportation, and numerous natural resources.

The Board of Trustees decided to continue in the above businesses and others. As part of the Trust Deed, the Board of Trustees was to make donations for good causes and discretionary payments to the beneficiaries where appropriate.

In the year 2022, the following transactions took place:

  • Total rental income from the real estate was GH¢9,375,000.
  • Administrative expenses of the Trust for the year 2022 amounted to GH¢725,000.
  • A friend of Karl Odogo contributed GH¢600,000 to the Trust by way of donation.
  • Interest received on the bank account of the Trust was GH¢350,000 gross.
  • The Trust received a total amount of GH¢1,240,000 from the transport operations.
  • Total depreciation computed and treated using generally accepted accounting principles was GH¢104,000.
  • Remuneration and fees of the Trustees for the 2022 year of assessment were GH¢980,000.
  • The External Auditors of the Trust charged GH¢45,000 for the year 2022, and it has been paid.
  • Donations were made to the following persons and institutions:
    • Ghana Heart Foundation (receipt obtained from Ghana Health Service): GH¢15,000
    • Kumasi Children’s Home (receipt from Social Welfare Department): GH¢15,000
    • XYZ Political Party (receipt from the Political Party): GH¢45,000
    • Funeral of a cousin of one of the members of the Governing Board of the Trustees: GH¢5,000
  • The Ghana Revenue Authority has granted a capital allowance of GH¢81,250.
  • Discretionary payments of GH¢265,000 for each beneficiary were made during the year.

Required:
a) Compute the chargeable income and tax payable by the Trust for the 2022 year of assessment. (12 marks)
b) Outline the general tax rules on trust institutions and trust beneficiaries. (8 marks)

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  • 15 Marks

TAX – May 2017 – L2 – SC – Q5 – Taxation of Trusts and Estates

Computation of assessable income for trust beneficiaries and net assessable income in the hands of the trustee.

Alhaji Oluwambe is the trustee of a Settlement created by late Chief Jongbo in favor of his four children, grandchildren, and others. He submitted the following information to Okun State Board of Internal Revenue for assessment purposes for the fiscal year ended December 31, 2014:

ii. Each beneficiary is entitled to 1/6 share of 1/3 of the distributable income.
iii. Capital allowance agreed with the tax authority was N7,350,000.

Required:

a. Compute the assessable income in the hands of each beneficiary. (14 Marks)
b. Determine the Net Assessable Income in the hands of the Trustee. (1 Mark)

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  • 20 Marks

TAX – May 2024 – L2 – SA – Q3 – Taxation of Non-Residents

Discuss significant economic presence in digital transactions and calculate the taxable income for Alhaji Yanko Abdulahi’s trust.

a. Section 6 (6A) of the Personal Income Tax Act Cap P8 LFN 2004, as amended by the Finance Act 2020, states that the Minister by Order can determine what constitutes the significant economic presence of a non-resident, executor, or trustee.

Required:
i. In relation to what constitutes a significant economic presence, discuss Digital transactions (4 Marks)
ii. Discuss Services (4 Marks)

b. Alhaji Yanko Abdulahi was a successful businessman in Kano before he died. He is survived by two children, Yahaya and Binta.

A trust was created for the benefit of his two children. The trustee’s records for the year ended December 31, 2021, revealed the following information:

Item Amount (N)
Rental income (gross) 2,400,000
Profit from trading activities 32,160,800
Interest received (gross) 840,000
Other income 630,500

Additional Information:

  • Yahaya is entitled to a fixed annuity of N148,000 per annum.
  • Allowance for trustee expenses: N62,000.
  • Capital allowance agreed with the Revenue: N1,260,000.
  • Trustee remuneration per trust deed:
    • Fixed – N25,000 per annum
    • Variable – 2% of computed income
  • Provision made for payment of N150,000 as discretionary payments to each child.
  • 60% of distributable income is shared between Yahaya and Binta in the ratio 55:45, respectively.

Required:
Compute the income of the trust assessable to tax in the hands of the trustee. (12 Marks)

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  • 15 Marks

TAX – Nov 2015 – L2 – Q7 – Taxation of Trusts and Estates

This question requires the computation of income tax payable by trustees and the amount due to beneficiaries from the settlement of Chief Sarki Oliver for the 2010 year of assessment.

Chief Sarki Oliver died peacefully in his sleep on 31 December 2009. He is survived by three children – Jimmy, Ngozi, and Charles. Two Trustees were appointed for the Settlement created in favor of the children to ensure that they were not badly affected by the demise of their father. Details presented by the two Trustees for the year ended 31 December 2010 are as follows:

Income N’000
Rental income (gross) 225,000
Trading income 250,000
Dividends (gross) 170,000
Interest on bank deposit 107,500
Sundry income 105,000
Total Income 857,500

Additional Information: (i) The Interest income is from Super Bank plc
(ii) Administrative and other expenses amounted to N32,000
(iii) Interest on debt repayment by the Settlement was N25,000
(iv) Fixed annuity to a beneficiary was N41,000 (Gross)
(v) Each beneficiary is entitled to 1/5 share of the net distributable income
(vi) Under the terms of the Trust Deed, the Trustees made discretionary payments to:

  • Jimmy N30,000
  • Ngozi N26,000
  • Charles N15,000
    (vii) Capital allowances – N64,000
    (viii) Trustees’ remuneration: Fixed amount of N25,000 each plus 2% of Computed Income
    (ix) The children have no other income.

In view of the recent agitation by the extended family members, you were contracted as
a consultant to compute the following:

Required:
a. Compute the income tax payable by the Trustees on the Trust income. (8 Marks)
b. Calculate the amount due to each beneficiary of the Settlement. (7 Marks)

 

 

 

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  • 10 Marks

TAX – May 2018 – L2 – Q6b – Taxation of Trusts and Estates

Compute the amounts due to beneficiaries from Mr. Salami's estate.

Compute the amount due to the beneficiaries for 2016 Year of Assessment.

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You're reporting an error for "TAX – May 2018 – L2 – Q6b – Taxation of Trusts and Estates"

  • 10 Marks

AT – March 2023 – L3 – Q5a – Business income – Corporate income tax

Compute the income tax payable by the trustees of Randy Koomson’s trust for the 2021 year of assessment.

Randy Koomson, who hails from Cape Coast in the Central Region, died in January 2021 and left his businesses and estates with trustees, who happened to be non-residents. Randy Koomson has two children: Araba Koomson and Kwamina Koomson. These two children were made the beneficiaries, and each of them is entitled to 1/3 of the net distributable income of the trust with the rest for administrative expenses.

The terms of the trust deed provided for discretionary payments to the beneficiaries and donations towards worthwhile causes. During the year 2021, discretionary payments of GH¢300,000 each were made to the children.

Gross Profit, before discretionary payments and other expenses below, for the year 2021 was GH¢3,500,000.

The following expenses were incurred:

The Ghana Revenue Authority has agreed on a capital allowance of GH¢72,550.

Required:
Compute the income tax payable by the trustees on the income for the 2021 year of assessment. (10 marks)

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  • 20 Marks

AT – Nov 2023 – L3 – Q4 – Ethical principles in taxation

Compute the chargeable income and tax payable for Fenty Trust Ltd and outline the general tax rules on trusts and beneficiaries.

Fenty Trust Ltd is a non-resident company acting as the trustee for four resident Ghanaians, each holding a 22.5% share in the Trust. The Trust was set up on the instruction of Mr. Karl Odogo before he died. Mr. Karl Odogo was a businessman with interests in real estate, transportation, and numerous natural resources.

The Board of Trustees decided to continue in the above businesses and others. As part of the Trust Deed, the Board of Trustees was to make donations for good causes and discretionary payments to the beneficiaries where appropriate.

In the year 2022, the following transactions took place:

  • Total rental income from the real estate was GH¢9,375,000.
  • Administrative expenses of the Trust for the year 2022 amounted to GH¢725,000.
  • A friend of Karl Odogo contributed GH¢600,000 to the Trust by way of donation.
  • Interest received on the bank account of the Trust was GH¢350,000 gross.
  • The Trust received a total amount of GH¢1,240,000 from the transport operations.
  • Total depreciation computed and treated using generally accepted accounting principles was GH¢104,000.
  • Remuneration and fees of the Trustees for the 2022 year of assessment were GH¢980,000.
  • The External Auditors of the Trust charged GH¢45,000 for the year 2022, and it has been paid.
  • Donations were made to the following persons and institutions:
    • Ghana Heart Foundation (receipt obtained from Ghana Health Service): GH¢15,000
    • Kumasi Children’s Home (receipt from Social Welfare Department): GH¢15,000
    • XYZ Political Party (receipt from the Political Party): GH¢45,000
    • Funeral of a cousin of one of the members of the Governing Board of the Trustees: GH¢5,000
  • The Ghana Revenue Authority has granted a capital allowance of GH¢81,250.
  • Discretionary payments of GH¢265,000 for each beneficiary were made during the year.

Required:
a) Compute the chargeable income and tax payable by the Trust for the 2022 year of assessment. (12 marks)
b) Outline the general tax rules on trust institutions and trust beneficiaries. (8 marks)

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