Q: After attending 2014 Trust Back
to Basics, it was suggested donor interest-free loans should bear interest
otherwise a disposition would arise which would be taxable in the donor’s
confirm if this is the case.
courts have held that an interest free loan can indeed constitute an "other
disposition” for purposes of section 7 and would therefore apply to a special
trust as well.
SARS states in their Draft Guide on the Taxation of Special Trusts
that "section 7(2) to 7(8) may have the effect that the income of a trust is
taxable in the hands of the person who made a donation, settlement or other
disposition to a trust. In some situations this rule will apply even if the
amounts have been vested in a beneficiary, such as when the beneficiary is a
spouse and tax avoidance is involved or when the beneficiary is a minor child
or when the donation is revocable at the instance of the donor.”
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.
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