Tutorial question

Alan, Brendan and Carol are the three surviving children of David and Elaine who died as a result of a car accident a
few years ago. Each parent had taken out a life insurance policy which paid out the sum of RM500,000 on their
death. David died immediately but Elaine survived for six weeks. Elaine inherited the proceeds of David’s policy
which she left by her will in trust (‘Trust No.1’) for their three children in equal shares. The income is to be
accumulated until each child reaches the age of eighteen, from which time they will be entitled to their shares of
the income. They will only be entitled to their shares of the capital at age twenty one. The monies from Elaine’s
policy form a separate discretionary trust for the three children (‘Trust No.2’). The Trustees have the power to
distribute the income to or for the benefit of the beneficiaries at any time and in such shares as they think fit.
There is no power to accumulate the income. The following information is available about the two trusts and the
children. All financial information is for the year to 31 December 2020:

RM
Alan – date of birth 30 September 2001
– employment income 21,000
– EPF deductions 2,310

Brendan – date of birth 30 June 2003

– at school in Malaysia – no other income

Carol – date of birth 31 March 2005

– at school in Malaysia – no other income

Trust No.1
Malaysian rental income 9,000
Malaysian exempt dividends 15,000
Trustee’s fee 3,000

Trust No.2
Interest on bank fixed deposit credited 30 June 2020 7,000
Interest on bank fixed deposit credited 31 December 2020 8,000
Trustee’s fee 4,000
The following income distributions took place during 2020:

RM RM RM
Alan Brendan Carol
Trust No.1 5,000 - -
Trust No.2 6,000 3,000 9,000
Payments in respect of minor beneficiaries are made to their guardian for their benefit.

Required:
(a) In respect of each trust, compute the total income, the chargeable income and the amount of income tax
payable by the trust body for the year of assessment 2020 and state the due date of payment. Assume that
the Director General’s discretion with regard to the treatment of Alan’s income in respect of Trust No.1 is
not exercised.
(b) Explain the Director General’s discretion with regard to the treatment of Alan’s income.
(c) In respect of each beneficiary, compute the income tax payable or repayable for the year of assessment 2020.