BAC 4644

TRUST

NOV 2012

Question 1
Ahmad was a businessman carrying on a cement business. He passed away suddenly in
2009, 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 2011 are as follows:
Business : 1 April 2010 - 31 Mar 2011
Gross income
Allowable expenses
Capital allowances due
Balancing charges
Balancing allowances

RM
800,000
620,000
60,000
3,000
26,000

Other income
Rental
Dividends (Malaysia)
Bank interest

Note (i)
Note (ii)

Dividends (China)(remitted)
Notes:

15,000
10,000
5,000
8,000

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 2011: 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
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BAC 4644

TRUST

NOV 2012

Compute the chargeable income of the trust for the year of assessment 2011 assuming
that section 61(2) of the Income Tax Act 1967 (as amended) was applied. S 61(2) - DG
allow the beneficiarys share of income as a deduction from the trust total income to
arrive at the chargeable income.
Question 2(Trusts with Accumulation)
Mr. Z died on 30th October 2011. A trust was created in his will. The income of the trust
for the year ended 31st December 2011 is as follows:
Business I (Malaysian)
Business II (Foreign)
Rent (Malaysian) net

RM
60,000 (Adjusted income RM 40,000)
30,000 (All remitted to Malaysia)
4,000

Additional information:
(a)
(b)
(c)
(d)
(e)
(f)
(g)

Cost of administering the trust is RM 2,000.

Approved donation amounts to RM 5,000.
Annuity of RM 15,000 is payable to Madam Y, the widow.
of the distributable trust income (if any) after distributing the annuity and
donation, is accumulated for the deceaseds son, Mr. X.
Mr. V and Mr. W are to have equal share in of the distributable income.
Mr. U is to be paid such sums as the trustee deems fit.
There are 3 trustees. One of them is resident in Malaysia.

In 2011, the beneficiaries received the following sums from the trust:
Beneficiary
Mr. V
Mr. W
Mr. U

-------------Amount Received in Malaysia----------Within Malaysia

Outside Malaysia
14,000
14,000
4,000

1,000
1,000
1,000

All the amounts received outside Malaysia in 2011 were remitted to the beneficiaries.
Required:
(a)
(b)

Calculate the income tax payable by the trust for year of assessment 2011.
Calculate the statutory income of each beneficiary for year of assessment 2011
assuming that all the beneficiaries are tax resident in Malaysia.

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BAC 4644

TRUST

NOV 2012

Question 3 (Settlement)
Mr. A owns several properties from which he received rentals. He decided to settle his
properties and the income therefrom among his children in the following manner:
1st Son Mr. B
Mr. B is married and is 42 years old. Under the terms of the settlement, Mr. B is to
receive the income from the properties so long as he lives. On his death, the properties
and the right to income would revert to Mr. A.
2nd Son Mr. C
Mr. C is 22 years old and is married. Under the terms of the settlement, Mr. A can revoke
the settlement anytime
Daughter Ms D
Ms D is 20 years old and unmarried. Under the terms of settlement she has absolute right
to her share of properties and the income

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