Discuss TBG ltd may claim a deduction for amount

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Reference no: EM132865003

Smith Joe was retrenched by his employer, TBG (Pty) Ltd, on 1 March 2019. He was 49 years old at the time of his retrenchment. He had befriended many customers in the local community who had previously been serviced by TBG (Pty) Ltd. If he became employed by a competing employer within the region, it would be possible that he could persuade them to become customers of his new employer, rather than of TBG (Pty) Ltd. TBG (Pty) Ltd therefore found it was necessary to restrain him from working for a competitor within the region. The company paid him R360 000 on 1 March 2019, not to work for a competitor, within the region for five years. TBG (Pty) Ltd financial year ends on the last day of February.

REQUIRED

Problem 1: Discuss whether the above amount will be included in Smith Joe gross income for the 2020 year of assessment.

Problem 2: Discuss whether TBG (PTY) Ltd may claim a deduction for the amount paid to Smith Joe. If so, calculate the amount that they may deduct and show full working for the 2020 year of assessment.

Reference no: EM132865003

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