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loss, allowance or capital loss in respect of the loan to the trust, resulting
in individuals being barred from cancelling or waiving loans which would
have the effect of reducing their asset base for estate duty purposes.

It can be noted that natural persons are not precluded from employing
the annual donations tax exemption of R100,000.00 to a donation to
the trust. Should an individual therefore make a donation to their trust of
R100,000.00 or less, section 7C will not be applicable and no interest will
be deemed to have accrued to the particular individual.
The aforesaid amount will not be owed by the trust to the individual in
terms of a loan and no interest will be incurred by the trust. An interest Commercial
free loan of R1,250,000.00 may therefore still be made by connected
persons to their trusts, since at an interest rate of 8%, this amount will
attract interest of R100,000.00, which in terms of the above mentioned
exemption will preclude liability to pay donations tax.
It is clear that section 7C will impact dramatically on the effectiveness
of using a trust as a vehicle for estate and tax planning purposes. It may
therefore be necessary for you to contact your tax specialist to assist you
in reviewing your current estate planning in the light of section 7C.

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