Albie Gray, a computer programmer, has mined for Bitcoins in his spare time for more than a year. (Bitcoin miners use special programmes to solve mathematical problems and are issued Bitcoins in exchange.) Using his employers computers in his lunchbreaks, Albie has managed to mine three Bitcoins worth $20,000 in total.

After the value of a Bitcoin reaches $10,000, Albie decides to give up his job to mine fulltime.

Unfortunately, Albie did not realise that he had been lucky when he mined his first Bitcoins. (A colleague had almost fully solved the problem before Albie used the computer.) Nevertheless, he spends eight hours a day, five days a week mining for Bitcoins. He has no success but runs up a huge electricity bill. His friend Blair, who is a commerce student, tells Albie that one consolation is he can deduct his electricity bill from his taxable income because he is in business.

Required:

1. Explain whether the value of the Bitcoins is taxable in Albies hands under ordinary concepts of income (section CA 1(2) of the Income Tax Act 2007).

2. Explain whether Albie is carrying on a business.

You should provide accurate statutory references and refer to relevant case law in your answers.