Q2.

The Zondo Family Trust was established in the 2018 year of assessment by Mmusi Zondo (hereafter
Mmusi). Mmusi was 76 years old at the time of creation of the Trust. In terms of the trust deed, Herman Zondo
is the sole trustee of the trust.

On creation of the Trust Mmusi donated the following assets to the Zondo Family Trust:
Nature of asset Value of asset (R)
Rental property 3 000 000

The beneficiaries of the trust are:

Beneficiary name Relation to founder Age
Zille Zondo Wife 72
Herman Zondo Eldest son 52
Maile Zondo Youngest son 44
Floyd Zondo Grandson (Herman’s son) 14

Herman donated R300 000 to the trust. The cash donation was invested in an interest- bearing investment in
a South African bank.

Maile Zondo lives in Botswana where he is ordinarily resident.

Mrs Zille Zondo donated shares in a company listed on the Johannesburg Stock Exchange to the Zondo
Family Trust.

The trust deed further stipulates that:

• Zille is entitled to an annual distribution of R200 000 from the trust.
• Herman will not receive any remuneration for being a trustee.
• Herman may use his discretion to distribute the rest of the trust income.

The table below details the receipts and accruals of the trust as well as the distribution thereof to the trust
beneficiaries for the 2019 year of assessment:

Total Rentals Dividends Interest

Receipts and accruals 600 000 100 000 300 000 200 000
 Less: Total distributions (250 000) (41 666) (125 000) (83 333)
(made up of the amounts
below)
Annuities:
- Zille (100 000) (16 667) (50 000) (33 333)
Lump sums:
- Herman (50 000) (8 333) (25 000) (16 667)
- Maile (20 000) (3 333) (10 000) (6 667)
- Floyd (80 000) (13 333) (40 000) (26 667)
Retained Income 450 000 158 334 175 000 116 667

You are required to:

Calculate the taxable income of the following taxpayers for the 2019 year of assessment. (35)
a) Mr Mmusi Zondo
b) Mrs Zille Zondo
c) Mr Herman Zondo

Suggested Solution (Method marking to be applied)

Mmusi Zondo
Details Applicable section Amount
Rental Income S7(2) beneficiary is spouse 16 667 √
Rental income S7(8) Maile non-resident 3 333 √
Rental income S7(5) Retained income in a trust√ 158 333 √
Taxable income 178 333 √√

Zille Zondo
Details Applicable section Amount
Rental Income S7(2) Spouse is taxed - √
Dividends
Rental Income S7(1) 50 000 √
Interest income S7(1) 33 333 √
Dividend income S7(8) Maile non-resident 10 000 √
Dividend income S7(5) Retained income in a trust√ 175 000 √
Gross Income Section 1 268 333 √√
Less: Exempt Income
Dividend paid via annuity is not exempt
Dividend income S (10) 2 - √
Dividend income S (10) 1 k dividend exemption (10 000) √√
Interest income S (10) 1 (i) > 65 yrs int. exemption (33 333) √
Dividend income S (10) 1 k dividend exemption (175 000) √
Taxable income 50 000,00 √√

Herman Zondo
Details Applicable section Amount
Rental Income S7(1) 8 333,00 √
Dividend income S7(1) 25 000,00 √√
Interest income S7(8) Maile non-resident 6 667,00 √
Interest income S7(1) 16 667,00 √
Interest income S7(3) Minor child beneficiary 26 667,00 √
Interest income S7(5) Retained income in a trust√ 116 667,00 √
Gross Income 200 001,00 √√
Less: Exempt income
Dividend income S (10) 1 k dividend exemption (25 000,00) √
Interest income S (10) 1 (i) < 65 yrs int. exemption (23 800,00) √
Taxable income 151 201,00 √√