estate under administration-tax2

8/3/2019 Estate Under Administration-tax2

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Executor and Responsibilities A person who is appointed to manage the estate from a

deceased that leaves a will.

The court will decide who is executor whether his/her

appointed by law/court. Executor being a personal representative is responsible to

provide for any income tax which is known to be payable,or can reasonably be foreseen to be payable, before makingany distribution to beneficiaries.

Failure to fulfill this responsibility will render an executorliable to pay a penalty equal to the amount of tax which thefailure relates.



Where an individual dies in the basis year for a YA, theexecutor is assessable and chargeable to tax on thechargeable income of the deceased:

a) for the basis year in which he died;b) for the next succeeding basis year; and

c) for the previous years (if necessary)

The chargeable income refers to any income accruing tohim (as if he had not died)



The period commencing on the date of death to thedate of last distribution of assets to the beneficiary isknown as the period of administration.

There is no time limit as to the period of administration.

During this period, the executor or administrator would continue liable for the income tax liability on

income accrued or derived from Malaysia or receivedin Malaysia from outside Malaysia on behalf of thedeceased person.



The assessment or the additional assessment must beraised within 3 years after the end of the YA for thebasis year in which the death occurred.

This is to avoid the executor from being called upon toaccount for matters which expired many years agorefer to records already destroyed or accountable topersonal liability.



Deceased person Chargeable on income received from beginning of the year

until date of death. Based on calendar year.

Can claim relief( for parents and children) and rebate(zakat) as usual.

Executor Chargeable on income received from date of death until the

end of the year. Cannot claim relief and rebate. Can claim special relief RM8,000 if deceased person

domiciled in Malaysia.



The income for YA between deceased person andexecutor shall be apportioned as follows:

*foreign source income received by any person is taxexempt.

SOURCE OF INCOME APPORTIONMENT

Business income/ (loss) Time basis

Interest and dividend Receipt basis

Rental income Time basis



Annuity Definition: income is purchased with the a sum of money and the capital has gone and has ceased toexist, the principal having been converted into an

annuity.

Executor’s remuneration

Allow for deduction(if executor is giving authority to

carry on the business of deceased person.Not allow for deduction if remuneration paid to

executor for the administrative work.



Administration expenses

Not deductible

Private and domestic expenseE.g: expense incurred after the production of income

or related to the assets held by executor.

Distribution of income

Payment made by executor of a deceased person tobeneficiary.

Not taxable



Aaron, domiciled and resident in Malaysia for tax purposes,died on 30/9/2009.His sources of income for 2009were asfollows:

RM’000

Adjusted income/(loss)

Business I (Malaysia) 60

Business II (Malaysia) (24)

Business III (Hong Kong) 10

Other income derived form Malaysia:

Interest from fixed deposit a/c(credit on31.12.2009)

8

Rental income 12



The executor, Fahrin, are resident of Malaysia made thefollowing payment outs of the income of the estate of Aaron (deceased)in 2009:

-Annuity of RM2000 to beneficiary,Nabil

-Distribution of RM3000 to beneficiary,Zizan

Required:a) Chargeable income of Aaron(to date of death)

b) Chargeable income of Estate of Aaron(Fahrin)

c) Total income of beneficiary Nabil and Zizan.



a) Computation of CI of Aaron for YA 2009

RM’000

Business I (3/4 x60) 45

Business II -Business III -

Interest -

Rental (3/4 x 12) 9

AGGREGATE INCOME 54

(-) current business loss (24)

TOTAL INCOME 30

(-) personal relief-special relief (8)

CHARGEABLE INCOME 22



b) Computation of CI of Estate of Aaron(Fahrin)

RM’000

Business I (1/4 x60) 15

Business II -

Business III exempted

Interest 8

Rental (1/4 x 12) 3

AGGREGATE INCOME 26

(-) annuity payable (2)

TOTAL INCOME 24(-) special relief (8)

CHARGEABLE INCOME 16



c)

No total income for Zizan as distribution is not taxable

Total income for Nabil : RM’000

Annuity 2



The executor will submit tax return form for deceasedperson.

Tax return form is to reconcile actual tax

2 type of return form:

FORM B-executor has to file for deceased person. Itcovers income from 1 January to the date of death.

FORM T-assessed on the executor on behalf of thedeceased person. It covers income of the deceasedform the date of death to 31 December.

estate under administration-tax2

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