QUESTION TWO (25 marks)

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

Required: 2.1 Discuss whether the above amount will be included in Carmen Cloetes gross income for the 2020 year of assessment. (5) 2.2 Discuss whether ABC (Pty) Ltd may claim a deduction for the amount paid to Carmen Cloete. If so, calculate the amount that they may deduct (show full workings) for the 2020 year of assessment. (20)