Query 2 Johnny Red is a South African resident and is 40 years old. He has run a successful jewellery business for the last 15 years. He operates the jewellery business from his store in central Johannesburg and runs the business as a sole proprietor. He is not a registered VAT vendor. Johnny Red has built a successful business primarily from selling jewellery that he obtains from the local residents at a very cheap price. He sometimes buys jewellery from residents that do not present a valid identity document as required by law. Over the last few years, this has become a practice of Johnny's, and he is known as the person to go to if you need diamonds or gold at a reasonable price. Most recently, Johnny Red was arrested for the sale of diamonds that he obtained illegally. He was subsequently convicted for these sales. He was, however, granted a reduced sentence by the South African Police Service as he gave up the names of the key individuals in the illegal diamond trade. His sales from illegal diamonds amounted to R1 300 000 for the year of assessment ended 28 February 2023. He received R900 000 during the 2023 year of assessment. The balance of R400 000 was still outstanding as at 28 February 2023

SARS included the RI 300 000 from illegal diamond sales in his gross income for the 2023 year of assessment. Johnny Red is extremely concerned about his normal tax liability for that year. YOU ARE REQUIRED TO: Motivate whether the RI 300 000 or any other amount should be included in the gross income of Johnny Red for the year of assessment ended 28 February 2023 with reference to the Income Tax Act. Your motivation must include reference to relevant case law. (10 Marks)