Question

Under a trust created by the will of the late Reginal, the trust income is to be
distributed as follows:
§ one-quarter to his widow;
§ to a son, aged 26, the amount the trustee considers necessary to meet his educational needs; and
§ the remainder of the income to a son, aged 20, currently serving a three-year sentence for culpable driving.
The net income of the trust estate for the current tax year amounts to $42,000,
of which $4,000 has been applied for the education of the son, aged 26.
Required:
Prepare a trust distribution statement showing how the income of the trust
estate for the current tax year would be assessed. Discuss your answer by
referring to relevant income tax legislation.

Answer 1

Given data as follows below:

The net income current tax year amounts = $42,000

Amount applied for the education of the son = $4000

Age term = 26 years

Particular and explanation	Amount in dollars
Net income current tax year amounts	$42,000
Less tax 30 % on net income current tax i.e, 42000 x 0.3	$ 12,600
Net income after deducting the 30 % tax $42,000 - $12,600	$29,000
Now calculating Distrubtion Income after taxation	$7,350
i) 1/4  to late Reginal
ii )Amount applied for the education of the son	$ 4,000
iii) At son age - 20 bal	$18,050

Explantion : According to the taxation laws. There was no interest will be for trust . It assumed as family trust.

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