[20] QUESTION THREE James Saunders is an expert art dealer with galleries in Cape Town and Johannesburg. During 2019 year of assessment he made sales amounting to R1 200 000. In the previous year, he had closing stock of art amounting to R300 000. His cost of sales amount in the income statement was R600 000. He also made purchases from his overseas suppliers amounting to R500 000. The following items were not included in these figures: An incompetent sales assistant spilt turpentine over a new crate of imported paintings from Italy. While James insisted that they were damaged beyond repair resulting in a loss to him of R5 000, the commissioner for SARS is refusing to allow the write-down. James took a painting from stock for his personal use in his home. The market value at that time was R30 000 and that paintings had cost him R24 000. James frames some of his purchased paintings if the artist cannot afford a decent frame. He purchased twenty frames for a total of R20 000 during the year and had three frames on hand at the end of the year. . During the year the also sold a few paintings to Matthew Proxenos, who is his brother-in-law, for R4 000 when the market value was R7 500. Operating expenses incurred during 2019 year of assessment, all of which are deductible in terms of section 11(a), amounted to R120 000. Ignore VAT. REGENT BUSINESS SCHOOL (RBS) - January 2019 30 DIFM YEAR 3 - ACADEMIC AND ASSESSMENT CALENDAR - DISTANCE Required: 3.1. Calculate James taxable income for the year of assessment ending February 2019. (15) 3.2. Assume James sold the paintings that he took home during the year for R50 000, to his sister, when the market value had risen to R80 000. Calculate his capital gains tax implications and clearly indicate with reasons the impact on taxable income (if any)