Topic: Taxation of Trusts and Estates

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  • 20 Marks

TAX – Nov 2023 – L2 – Q4 – Taxation of Trusts and Estates

Compute the net income assessable in the hands of trustees and assessable income of each beneficiary.

The records of the two trustees of Olalomi Children Settlement created in favor of the three children—Olami, Olambe, and Olaide—revealed the following as of December 31, 2020:

Income Type Amount (N)
Rental income (gross) 398,900
Trading income 210,000
Dividend (gross) 196,000
Profit on sale of non-current assets 600,000

Additional Information:

  1. The interest received was from Gbogbo-Ero Commercial Bank Limited.
  2. Other allowable expenses amounted to N23,000.
  3. Each beneficiary was entitled to a quarter of the net distributable income.
  4. Fixed annuity to the beneficiaries was N42,000 (gross) to be shared equally.
  5. Trustee’s remuneration per trust deed was fixed at N25,000 each, plus 2.5% of the total computed income.
  6. Discretionary payments were made to Olami (N10,000), Olambe (N34,000), and Olaide (N29,000).
  7. Agreed capital allowance was N87,600.
  8. Administrative and other expenses amounted to N106,000.

Required: a. Compute the net income assessable in the hands of the trustees. (14 Marks)
b. Compute the assessable income in the hands of each beneficiary. (6 Marks)

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  • 15 Marks

TAX – May 2015 – L2 – SC – Q7 – Taxation of Trusts and Estates

Determine computed income of a trust, tax liabilities, and apportionment of income among beneficiaries.

Chief Zeta created a Trust many years ago for the benefit of his four children, Alpha, Beta, Cepha, and Delphi. A lawyer was appointed as the Trustee to his Estate.

For the year ended 30 September 2014, the Trust income amounted to ₦3,120,000. Each of the beneficiaries receives an annuity of ₦150,000 every year while the expenses incurred on the administration of the Trust was ₦57,500 per annum. The trustee is on a remuneration of 2% of the Computed Income.

Chief Zeta instructed that discretionary payments of ₦22,500, ₦17,500, ₦15,000, and ₦12,500 respectively should be made to Alpha, Beta, Cepha, and Delphi respectively. In addition, nine of the ten portions of the remainder of the Computed Income should be shared equally among the four children.

Chief Zeta has requested you to supervise the administration of the above Trust.

You are requested to:

a. State the basis of assessment of Estates, Trusts or Settlements. (1 Mark)

b. Identify the persons chargeable to Income Tax under the Trust or Settlement created by Chief Zeta. (3 Marks)

c. Compute the income of the Trust. (3 Marks)

d. Determine the amount due to each beneficiary. (6 Marks)

e. Explain how the Computed Income should be apportioned and how the Income Tax burden will be shared by all the parties. (Ignore Withholding tax). (2 Marks)

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  • 15 Marks

TAX – May 2017 – L2 – SC – Q5 – Taxation of Trusts and Estates

Computation of assessable income for trust beneficiaries and net assessable income in the hands of the trustee.

Alhaji Oluwambe is the trustee of a Settlement created by late Chief Jongbo in favor of his four children, grandchildren, and others. He submitted the following information to Okun State Board of Internal Revenue for assessment purposes for the fiscal year ended December 31, 2014:

ii. Each beneficiary is entitled to 1/6 share of 1/3 of the distributable income.
iii. Capital allowance agreed with the tax authority was N7,350,000.

Required:

a. Compute the assessable income in the hands of each beneficiary. (14 Marks)
b. Determine the Net Assessable Income in the hands of the Trustee. (1 Mark)

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  • 15 Marks

TAX – Nov 2015 – L2 – Q7 – Taxation of Trusts and Estates

This question requires the computation of income tax payable by trustees and the amount due to beneficiaries from the settlement of Chief Sarki Oliver for the 2010 year of assessment.

Chief Sarki Oliver died peacefully in his sleep on 31 December 2009. He is survived by three children – Jimmy, Ngozi, and Charles. Two Trustees were appointed for the Settlement created in favor of the children to ensure that they were not badly affected by the demise of their father. Details presented by the two Trustees for the year ended 31 December 2010 are as follows:

Income N’000
Rental income (gross) 225,000
Trading income 250,000
Dividends (gross) 170,000
Interest on bank deposit 107,500
Sundry income 105,000
Total Income 857,500

Additional Information: (i) The Interest income is from Super Bank plc
(ii) Administrative and other expenses amounted to N32,000
(iii) Interest on debt repayment by the Settlement was N25,000
(iv) Fixed annuity to a beneficiary was N41,000 (Gross)
(v) Each beneficiary is entitled to 1/5 share of the net distributable income
(vi) Under the terms of the Trust Deed, the Trustees made discretionary payments to:

  • Jimmy N30,000
  • Ngozi N26,000
  • Charles N15,000
    (vii) Capital allowances – N64,000
    (viii) Trustees’ remuneration: Fixed amount of N25,000 each plus 2% of Computed Income
    (ix) The children have no other income.

In view of the recent agitation by the extended family members, you were contracted as
a consultant to compute the following:

Required:
a. Compute the income tax payable by the Trustees on the Trust income. (8 Marks)
b. Calculate the amount due to each beneficiary of the Settlement. (7 Marks)

 

 

 

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  • 20 Marks

TAX – Nov 2020 – L1 – SA – Q3 – Taxation of Trusts and Estates

State the tax authorities of a trust or settlement and special provisions for unmarried children.

A settlement is a means by which enjoyment of an estate or part of it is transferred to another person, either through a disposition, trust or covenant, agreement, arrangement, or transition of assets by reference to a trust for the benefits of persons specified.

The term “trust” relates to an equitable obligation, binding a person, called the trustee, to deal with a property over which he/she has custody (which is called the trust property), for the benefit of persons (beneficiaries) of which he/she may be one.

Required:
a. State the relevant tax authorities of a trust or settlement and the beneficiaries.
(8 Marks)

b. State the special provisions in respect of settlement on unmarried children.
(12 Marks)

Total: 20 Marks

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  • 9 Marks

TAX – Nov 2020 – L1 – SA – Q2b – Taxation of Trusts and Estates

Compute the assessable profit for XYZ Unit Trust Scheme for the year ended December 31, 2018.

In 2004, Chief Kris Uzodime applied to the Securities and Exchange Commission (SEC) for an approval to float XYZ Unit Trust Scheme. In 2005, XYZ Unit Trust Scheme secured an approval to deal in the business of a unit trust scheme.

Its statement of profit or loss for the year ended December 31, 2018, revealed the following:

Description Amount (N)
Investment income
Rental income (gross) 12,650,000
Interest on bank deposit (gross) 5,140,000
Dividend received (gross) 16,300,000
Total Investment Income 34,090,000
Less:
Staff salaries and wages 9,300,000
Manager’s remuneration (20% of gross income) 6,818,000
Other expenses 1,020,000
Bank charges and commission 170,500
Depreciation 321,600
Total Expenses 17,630,100
Net profit 16,459,900

Additional information:
(i) Other expenses include:

  • Loss on disposal of property, plant and equipment: N121,000
  • Preliminary expenses: N210,000
  • Office furniture acquired: N300,500

(ii) All the incomes were subjected to deductions of withholding tax.

Required:
Compute the assessable profit for the relevant assessment year.
(9 Marks)

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  • 1 Marks

TAX – Nov 2020 – L1 – SA – Q18 – Taxation of Trusts and Estates

Identify the term used for a person receiving real property under a Will.

The person who receives a real property under a Will is a:
A. Legatee
B. Remainder man
C. Personal representative
D. Annuitant

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  • 20 Marks

TAX – May 2021 – L1 – SB – Q1 – Taxation of Trusts and Estates

Calculation of net distributable income of a trust and assessable income of beneficiaries.

Chief Adio Jaiyesimi, a Chartered Accountant, died in London after a brief illness on June 10, 2015. He was survived by four children namely: Akeem; Ayodeji; Olabisi; and Adekunle. He created a trust for the benefits of his four children. The records of the trustee for the year ended December 31, 2020, have revealed the following:

Description Amount (N)
Adjusted trading profits for the year ended December 31, 2020 36,400,000
Dividend (gross) 305,000
Rental income (gross) 820,000
Interest received (gross) 118,500
Sundry income 24,800

Additional information:
(i) Fixed annuity paid to Deji, his first child: 81,000
(ii) Fixed remuneration for the trustee: 500,000
(iii) Variable remuneration of the trustee – 5% of gross income: 56
(iv) Allowable expenses of the trustee as agreed: 60,000
(v) Capital allowances as agreed with the Revenue: 395,000
(vi) Discretionary payments were made by the trustee in agreement with the trust deed as follows:

Beneficiary Amount (N)
Akeem 300,000
Ayodeji 250,000
Olabisi 220,000
Adekunle 180,000

(vii) One third of the distributable income is to be shared equally among the children.

Required:
a. Compute the net distributable income in the hands of the trustee. (13 Marks)
b. Compute the assessable income in the hands of each beneficiary. (7 Marks)

 

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  • 10 Marks

TAX – May 2018 – L2 – Q6b – Taxation of Trusts and Estates

Compute the amounts due to beneficiaries from Mr. Salami's estate.

Compute the amount due to the beneficiaries for 2016 Year of Assessment.

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  • 20 Marks

TAX – May 2018 – L2 – Q2 – Tax Planning and Management

Compute assessable incomes from various investments for Tosin Oguntona.

Tosin Oguntona was an employee of a Federal Government parastatal in Nigeria. While in service, he invested his earnings in various investments, deriving incomes from them along with his monthly pension. The following details were provided:

Assessment Years 2013 2014
Dividend Income
Dividend from Nigerian companies N1,200,000 N1,500,000
Dividend from abroad paid into a domiciliary account $4,000 $4,500
Rental Income
Rent from buildings in Ibadan N630,000 N720,000
Rent from buildings in Abuja N1,500,000 N1,740,000
Rent from buildings in Oyo N420,000 N520,000
Rent from buildings in Lagos N750,000 N780,000
Expenses
Repairs and maintenance N90,000 N96,000
Personal income tax paid N240,000 N280,000
Water rate N40,000 N50,000
Depreciation on building N620,000 N700,000
Agent’s commission N96,000 N108,000
Insurance N120,000 N150,000
Depreciation on plant N150,000 N162,000
Interest Incomes
Interest received from bank N360,000 N420,000
Interest on domiciliary account $1,200 $1,500

Other information:

  1. Capital allowances agreed with the revenue authority for 2013 and 2014 assessment years were N150,000 and N180,000 respectively.
  2. Insurance on properties included N24,000 and N30,000 for 2013 and 2014, respectively, for his private residence.
  3. Pension of N80,000 per month was received.
  4. Exchange rate: N160 to $1.

Required:
Compute the Assessable Incomes of Tosin Oguntona for 2013 and 2014 Assessment Years.

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  • 20 Marks

TAX – Nov 2023 – L2 – Q4 – Taxation of Trusts and Estates

Compute the net income assessable in the hands of trustees and assessable income of each beneficiary.

The records of the two trustees of Olalomi Children Settlement created in favor of the three children—Olami, Olambe, and Olaide—revealed the following as of December 31, 2020:

Income Type Amount (N)
Rental income (gross) 398,900
Trading income 210,000
Dividend (gross) 196,000
Profit on sale of non-current assets 600,000

Additional Information:

  1. The interest received was from Gbogbo-Ero Commercial Bank Limited.
  2. Other allowable expenses amounted to N23,000.
  3. Each beneficiary was entitled to a quarter of the net distributable income.
  4. Fixed annuity to the beneficiaries was N42,000 (gross) to be shared equally.
  5. Trustee’s remuneration per trust deed was fixed at N25,000 each, plus 2.5% of the total computed income.
  6. Discretionary payments were made to Olami (N10,000), Olambe (N34,000), and Olaide (N29,000).
  7. Agreed capital allowance was N87,600.
  8. Administrative and other expenses amounted to N106,000.

Required: a. Compute the net income assessable in the hands of the trustees. (14 Marks)
b. Compute the assessable income in the hands of each beneficiary. (6 Marks)

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  • 15 Marks

TAX – May 2015 – L2 – SC – Q7 – Taxation of Trusts and Estates

Determine computed income of a trust, tax liabilities, and apportionment of income among beneficiaries.

Chief Zeta created a Trust many years ago for the benefit of his four children, Alpha, Beta, Cepha, and Delphi. A lawyer was appointed as the Trustee to his Estate.

For the year ended 30 September 2014, the Trust income amounted to ₦3,120,000. Each of the beneficiaries receives an annuity of ₦150,000 every year while the expenses incurred on the administration of the Trust was ₦57,500 per annum. The trustee is on a remuneration of 2% of the Computed Income.

Chief Zeta instructed that discretionary payments of ₦22,500, ₦17,500, ₦15,000, and ₦12,500 respectively should be made to Alpha, Beta, Cepha, and Delphi respectively. In addition, nine of the ten portions of the remainder of the Computed Income should be shared equally among the four children.

Chief Zeta has requested you to supervise the administration of the above Trust.

You are requested to:

a. State the basis of assessment of Estates, Trusts or Settlements. (1 Mark)

b. Identify the persons chargeable to Income Tax under the Trust or Settlement created by Chief Zeta. (3 Marks)

c. Compute the income of the Trust. (3 Marks)

d. Determine the amount due to each beneficiary. (6 Marks)

e. Explain how the Computed Income should be apportioned and how the Income Tax burden will be shared by all the parties. (Ignore Withholding tax). (2 Marks)

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  • 15 Marks

TAX – May 2017 – L2 – SC – Q5 – Taxation of Trusts and Estates

Computation of assessable income for trust beneficiaries and net assessable income in the hands of the trustee.

Alhaji Oluwambe is the trustee of a Settlement created by late Chief Jongbo in favor of his four children, grandchildren, and others. He submitted the following information to Okun State Board of Internal Revenue for assessment purposes for the fiscal year ended December 31, 2014:

ii. Each beneficiary is entitled to 1/6 share of 1/3 of the distributable income.
iii. Capital allowance agreed with the tax authority was N7,350,000.

Required:

a. Compute the assessable income in the hands of each beneficiary. (14 Marks)
b. Determine the Net Assessable Income in the hands of the Trustee. (1 Mark)

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  • 15 Marks

TAX – Nov 2015 – L2 – Q7 – Taxation of Trusts and Estates

This question requires the computation of income tax payable by trustees and the amount due to beneficiaries from the settlement of Chief Sarki Oliver for the 2010 year of assessment.

Chief Sarki Oliver died peacefully in his sleep on 31 December 2009. He is survived by three children – Jimmy, Ngozi, and Charles. Two Trustees were appointed for the Settlement created in favor of the children to ensure that they were not badly affected by the demise of their father. Details presented by the two Trustees for the year ended 31 December 2010 are as follows:

Income N’000
Rental income (gross) 225,000
Trading income 250,000
Dividends (gross) 170,000
Interest on bank deposit 107,500
Sundry income 105,000
Total Income 857,500

Additional Information: (i) The Interest income is from Super Bank plc
(ii) Administrative and other expenses amounted to N32,000
(iii) Interest on debt repayment by the Settlement was N25,000
(iv) Fixed annuity to a beneficiary was N41,000 (Gross)
(v) Each beneficiary is entitled to 1/5 share of the net distributable income
(vi) Under the terms of the Trust Deed, the Trustees made discretionary payments to:

  • Jimmy N30,000
  • Ngozi N26,000
  • Charles N15,000
    (vii) Capital allowances – N64,000
    (viii) Trustees’ remuneration: Fixed amount of N25,000 each plus 2% of Computed Income
    (ix) The children have no other income.

In view of the recent agitation by the extended family members, you were contracted as
a consultant to compute the following:

Required:
a. Compute the income tax payable by the Trustees on the Trust income. (8 Marks)
b. Calculate the amount due to each beneficiary of the Settlement. (7 Marks)

 

 

 

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  • 20 Marks

TAX – Nov 2020 – L1 – SA – Q3 – Taxation of Trusts and Estates

State the tax authorities of a trust or settlement and special provisions for unmarried children.

A settlement is a means by which enjoyment of an estate or part of it is transferred to another person, either through a disposition, trust or covenant, agreement, arrangement, or transition of assets by reference to a trust for the benefits of persons specified.

The term “trust” relates to an equitable obligation, binding a person, called the trustee, to deal with a property over which he/she has custody (which is called the trust property), for the benefit of persons (beneficiaries) of which he/she may be one.

Required:
a. State the relevant tax authorities of a trust or settlement and the beneficiaries.
(8 Marks)

b. State the special provisions in respect of settlement on unmarried children.
(12 Marks)

Total: 20 Marks

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  • 9 Marks

TAX – Nov 2020 – L1 – SA – Q2b – Taxation of Trusts and Estates

Compute the assessable profit for XYZ Unit Trust Scheme for the year ended December 31, 2018.

In 2004, Chief Kris Uzodime applied to the Securities and Exchange Commission (SEC) for an approval to float XYZ Unit Trust Scheme. In 2005, XYZ Unit Trust Scheme secured an approval to deal in the business of a unit trust scheme.

Its statement of profit or loss for the year ended December 31, 2018, revealed the following:

Description Amount (N)
Investment income
Rental income (gross) 12,650,000
Interest on bank deposit (gross) 5,140,000
Dividend received (gross) 16,300,000
Total Investment Income 34,090,000
Less:
Staff salaries and wages 9,300,000
Manager’s remuneration (20% of gross income) 6,818,000
Other expenses 1,020,000
Bank charges and commission 170,500
Depreciation 321,600
Total Expenses 17,630,100
Net profit 16,459,900

Additional information:
(i) Other expenses include:

  • Loss on disposal of property, plant and equipment: N121,000
  • Preliminary expenses: N210,000
  • Office furniture acquired: N300,500

(ii) All the incomes were subjected to deductions of withholding tax.

Required:
Compute the assessable profit for the relevant assessment year.
(9 Marks)

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  • 1 Marks

TAX – Nov 2020 – L1 – SA – Q18 – Taxation of Trusts and Estates

Identify the term used for a person receiving real property under a Will.

The person who receives a real property under a Will is a:
A. Legatee
B. Remainder man
C. Personal representative
D. Annuitant

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  • 20 Marks

TAX – May 2021 – L1 – SB – Q1 – Taxation of Trusts and Estates

Calculation of net distributable income of a trust and assessable income of beneficiaries.

Chief Adio Jaiyesimi, a Chartered Accountant, died in London after a brief illness on June 10, 2015. He was survived by four children namely: Akeem; Ayodeji; Olabisi; and Adekunle. He created a trust for the benefits of his four children. The records of the trustee for the year ended December 31, 2020, have revealed the following:

Description Amount (N)
Adjusted trading profits for the year ended December 31, 2020 36,400,000
Dividend (gross) 305,000
Rental income (gross) 820,000
Interest received (gross) 118,500
Sundry income 24,800

Additional information:
(i) Fixed annuity paid to Deji, his first child: 81,000
(ii) Fixed remuneration for the trustee: 500,000
(iii) Variable remuneration of the trustee – 5% of gross income: 56
(iv) Allowable expenses of the trustee as agreed: 60,000
(v) Capital allowances as agreed with the Revenue: 395,000
(vi) Discretionary payments were made by the trustee in agreement with the trust deed as follows:

Beneficiary Amount (N)
Akeem 300,000
Ayodeji 250,000
Olabisi 220,000
Adekunle 180,000

(vii) One third of the distributable income is to be shared equally among the children.

Required:
a. Compute the net distributable income in the hands of the trustee. (13 Marks)
b. Compute the assessable income in the hands of each beneficiary. (7 Marks)

 

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  • 10 Marks

TAX – May 2018 – L2 – Q6b – Taxation of Trusts and Estates

Compute the amounts due to beneficiaries from Mr. Salami's estate.

Compute the amount due to the beneficiaries for 2016 Year of Assessment.

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  • 20 Marks

TAX – May 2018 – L2 – Q2 – Tax Planning and Management

Compute assessable incomes from various investments for Tosin Oguntona.

Tosin Oguntona was an employee of a Federal Government parastatal in Nigeria. While in service, he invested his earnings in various investments, deriving incomes from them along with his monthly pension. The following details were provided:

Assessment Years 2013 2014
Dividend Income
Dividend from Nigerian companies N1,200,000 N1,500,000
Dividend from abroad paid into a domiciliary account $4,000 $4,500
Rental Income
Rent from buildings in Ibadan N630,000 N720,000
Rent from buildings in Abuja N1,500,000 N1,740,000
Rent from buildings in Oyo N420,000 N520,000
Rent from buildings in Lagos N750,000 N780,000
Expenses
Repairs and maintenance N90,000 N96,000
Personal income tax paid N240,000 N280,000
Water rate N40,000 N50,000
Depreciation on building N620,000 N700,000
Agent’s commission N96,000 N108,000
Insurance N120,000 N150,000
Depreciation on plant N150,000 N162,000
Interest Incomes
Interest received from bank N360,000 N420,000
Interest on domiciliary account $1,200 $1,500

Other information:

  1. Capital allowances agreed with the revenue authority for 2013 and 2014 assessment years were N150,000 and N180,000 respectively.
  2. Insurance on properties included N24,000 and N30,000 for 2013 and 2014, respectively, for his private residence.
  3. Pension of N80,000 per month was received.
  4. Exchange rate: N160 to $1.

Required:
Compute the Assessable Incomes of Tosin Oguntona for 2013 and 2014 Assessment Years.

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