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Thread: Family Trust - Tax calculation

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    Family Trust - Tax calculation

    Hi,

    I am a trustee of a family trust, which basically holds assets (not a trading trust). I am trying to understand the tax calculation done by the previous accountants.

    There are only a few line items in the income statement. I am putting amounts next to each item to illustrate the tax calc. - Income: Donations received R120 and interest received from the bank R5. Expenses: Accounting fees R20, Life insurance policy of the trustees R52, bank charges R2 and trustee fees paid to an independent trustee R30.

    The tax calc is as follow:

    Income:
    Donations R120
    Interest received R5
    R125

    Less: Non-taxable income
    Donations received R120

    Gross income R5

    Less: Deductions and allowances
    Expenses R104

    Add: Non-deductible expenses
    Life insurance R52
    Expenses (*) R47
    R99

    Taxable income nil

    So basically, the expenses added back in (*) is the balance of the expenses after deducting an amount equal to the gross income to make the taxable income nil. Can anybody please help me understand why they did this?

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    Quote Originally Posted by J7J View Post
    Can anybody please help me understand why they did this?
    Probably in case a tax loss arises that can be offset against taxable income elsewhere.
    The trouble with opportunity is it normally comes dressed up as work.

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    The direct expenses relating to earning the interest income will be capped to whatever the income was

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