Mark Abrahams is a partner at a law firm. He is 40 years old and unmarried. He has incurred a number of expenses during the 2020 year of assessment. He would like to know if they are deductible in the determination of his taxable income. These expenses are as follows: On 1 July 2020 Mark purchased for himself a top of the range 'notebook' computer (a small and portable computer) at a cash cost of R16 200. He takes the 'notebook' computer with him whenever he consults with clients out of the office. He believes that his clients are most impressed when he is able to access and tailor agreements and other standard documents during their consultation. He is also fanatical about computer games and because of the size of the 'notebook' computer he is able to play these games on flights and even in bed. He has estimated that he uses the 'notebook' computer 20% of the time for recreational purposes (including his computer games). The commissioner has approved a three-year write-off period for the 'notebook' computer under Interpretation Note 47 and General Binding Rule 7. Other costs incurred on the 'notebook' computer during the 2020 year of assessment are as follows: - Repairs and maintenance of R1 850. - Compact disks used solely for storing work documents and agreements of R2 250. - Compact disks of computer games of R1 420. (8) On 1 March 2019 Mark purchased a plot of land for R200 000. He paid cash for it. He then erected on it a suite of offices (a commercial building). It cost R3 300 000 to erect. It was completed on 31 December 2019. As from 1 January 2020 it was let at a market-related rental of R22 500 a month to the firm of attorneys that Mark is a partner of. To help finance its cost of erection, Mark had borrowed R3 000 000 at 13%. Interest incurred on this loan for the 10 month period from 1 March 2019 to 31 December 2019 was R325 000. Interest incurred on this loan for the two-month period from 1 January 2020 to 28 February 2020 was R65 000. The only other expense incurred by him on this rent-producing property investment was rates of R60 000 for the 2020 year of assessment. (8) 2  Joy Rose, the tea lady, was an employee of the firm of attorneys that Mark is a partner of for many years. She retired at the age of 50 years during the 2020 year of assessment. Under a binding agreement between her and the firm of attorneys, it agreed to award R12 000 a year to her for the maintenance of her two minor children, for the next 10 years. Mark supported this agreement because Joy had brought him many cups of tea over the years when she had been employed. He greatly appreciated being served tea by her. The first award of R12 000 was incurred by the firm of attorneys in the 2020 year of assessment. (4)

 Required:

 Discuss whether Mark will be entitled to a deduction, or a capital allowance, 

determine the  taxable income for the expenses he incurred as detailed above.

Answer rating: 100% (QA)

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