CASE STUDY

Amanda Li, a Singaporean, is Executive Director of a local manufacturing company and sits on the Food and Nutritional Company’s Board of Directors as a non-executive director.

WEALTH PROTECTION – TAX PLANNING

Amanda Li received the following in the 2016:

1. At the Food and Nutritional Company’s annual general meeting on 30 August 2016, it was announced that Amanda would be entitled to director’s fees of S$100,000 for her services to the company for the financial year ended August 2016. This amount will be paid to Amanda on 1st September 2017.
2. Amanda is also a successful runway model. In May 2016, she was offered a modelling assignment in Hong Kong. She was paid S$85,000 for her efforts and she used the entire sum to buy a beautiful diamond bracelet in Hong Kong. Upon completing her assignment, she returned to Singapore with the diamond bracelet.
3. She conducted lectures for a private institution in Singapore for the period March to September 2016. All amounts earned by her were directly deposited into Standard Chartered Bank, London, which is used by her 3rd sister who is studying in London. The lecturing income amounts to S$45,000.
4. She won S$150,000 in a Big Sweep draw during the year 2016.
5. She wrote a book for which she received Royalty income in 2016. The following breakdown is as follows:

Royalty Income S$52,520

Related Expenses Incurred

Printing and Stationary S$15,500

Advertisement and Publicity S$8,600

Legal Fees S$2,480

6. Amanda Li has 2 properties in her name which have been rented out in 2016. Property 2 was vacant for 3 months. The details of the properties are as follows:

Description Property 1 Property 2

Rental Income S$4,500 per month S$3,600 per month

Property Tax S$330 per month S$280 per month

Maintenance Fees S$190 per month S$130 per month

Major Renovation Nil S$15,000

Repairs S$1,600 Nil

Wall Painting S$2,800 Nil

COR167 Tutor-Marked Assignment

7. Amanda Li was given an Option to purchase 100,000 shares at S$2.30 each at her local manufacturing company under the Staff Share Option Scheme. She exercised the option and later sold the shares. The details of the share prices and the relevant dates are given below:

Date Description Market Price

5 October 2015 Option Exercise Price S$2.30

12 July 2016 Option Exercised S$3.50

19 August 2017 Sold the Shares S$5.00

WEALTH ACCUMULATION – RETIREMENT PLANNING

Question 1 – WEALTH PROTECTION – TAX PLANNING

(a) Identify and explain to Amanda Li which of her following incomes will be subjected to tax in Year of Assessment 2017.

(i) Director’s Fees of S$100,000

(ii) Runway model assignment income of S$85,000 from Hong Kong modelling company

(iii) Lecturing income of S$45,000

(iv) Big Sweep winning of S$150,000

(12 marks)

(b) Compute Amanda Li’s tax liabilities for the Royalty income.

(8 marks)

(c) Determine Amanda Li’s income from the two properties for the Year of Assessment 2017.

(10 marks)

(d) Calculate the amount of Share Option benefit assessable on Amanda Li.

 (6 marks)

Question 2 – WEALTH ACCUMULATION – RETIREMENT PLANNING

(a)(i) What is an Advance Medical Directive and how does it work?

 (6 marks)

(a)(ii) List the circumstances under which a doctor will certify that the person is terminally ill.

 (6 marks)

(a)(iii) How can Amanda revoke her AMD when she is unable to write?

 (6 marks)

(b)(i) Determine the amount Amanda can contribute to her own Supplementary Retirement Scheme Account and state the eligibility criteria

(6 marks)

(b)(ii) What is the amount Amanda can use to top up Sandra’s CPF Account? State the reason.

(6 marks)

(c) List FIVE (5) options available for Amanda to bridge the retirement shortfall (i.e. the additional funds needed) between her current retirement investment and her retirement goals.

(5 marks)

Question 3 – WEALTH GIVING – ESTATE PLANNING

(a) Explain the accuracy of the following statement.

“Trust is the disposition of assets upon death of grantor while Will helps the settlor with the disposition of assets before his death.

 (8 marks)

(b)(i) Is Amanda’s Will valid after her marriage? Explain.

 (ii) When should Amanda review her Will?

(6 marks)

(c) Upon her Death, Amanda wishes to give her assets shown below to the stated beneficiaries. You are to advise her about the most effective way of planning her estates:

(i) Her Pine Grove property to her parents

(ii) Whole Life Insurance Policy’s Proceeds to Brad and Sandra

(iii) Saving and Fixed Deposit Amount to charity

(15 marks)