On $1$ April $2023,$ TradeSteel $($Pty$)$ Ltd$,($TradeSteel$),$ a company specialising in global

steel trading, had a debt of R$600000.$ TradeSteel used this debt to fund trading stock,

all of which were tax deductible under section $11($a$).$ TradeSteel$$s creditor discharged

the debt of R$600000,$ due to TradeSteel$$s inability to settle this debt due to cash flow

constraints. Of the debt owed, R$400000$ stems from trading stock still held, and the

remaining R$200000$ relates to trading stock sold in the $2023$ year of assessment.

TradeSteel is a South African resident company with a February financial year$-$end.

REQUIRED:

Discuss and calculate the tax implications for TradeSteel $($Pty$)$ Ltd of the debt

compromise for the $2024$ year of assessment.

$$ Support your answer with references to the Income Tax Act.

$$ Ignore any capital gains tax and VAT implications.

$$ Remember to first state the relevant requirements of the Income Tax Act,

whereafter you apply the requirements to the facts of the scenario.

$(13$ marks$)$