This taxpayer has trust that owns a two property, the taxpayer who the beneficiary of the trust owes trust +/-R3 700 000 due to the fact that one property was sold in the trust and she taken the proceeds of the sale. A resolution was drafted that the R3 7
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
We have no idea how the beneficiary was able to take the full proceeds from the sale of the property. We accept that the trustees of the trust didn’t authorise that, unlikely that they would have done. Well also accept that the beneficiary didn’t have a vested right to the proceeds, but even then, we expect that the amount may well have to be paid to the trust in the first instance. In any event, this is not a tax related issue and should be answered from the terms of the trust deed and powers of the trustees.
The proposed resolution appears to be a vesting event. The tax consequences will have to be determined from the nature of what was vested. It doesn’t appear to be from ‘income’, or a capital gain, and section 25B, or paragraph 80, will then not apply.
It appears that the intention of the decision by the trustees, is to apply set-off (the debt and the entitlement to the amount vested).