Trusts
Applied questions written from the supplied trust coverage.
Applied Questions
Question 1 — Trust income v net income
A discretionary trust deed defines income using accounting income. The trust has accounting income of $200,000 and a $100,000 taxable capital gain. Explain why one figure cannot simply be substituted for the other.
Question 2 — Present entitlement
A trustee signs a distribution resolution after year end purporting to make a beneficiary presently entitled to the prior year’s trust income. Identify the timing issue.
Question 3 — Fixed beneficiary
A resident adult beneficiary is presently entitled to 40% of trust income. Explain the starting point under s 97.
Question 4 — Capital gain streaming
A deed permits streaming and the trustee wants a capital gain assessed to one beneficiary and ordinary income to another. Identify the statutory layer that must be considered.
Question 5 — Section 100A
A beneficiary is made presently entitled but, under a pre-arranged understanding, transfers the distribution to the beneficiary’s parent. Identify the s 100A issue.
Question 6 — Trust losses
A trust with carried-forward losses changes beneficiaries and business activities. Explain why the losses cannot be assumed to remain freely deductible.