Rent-a-car (Pty) Limited, a car-hire business, paid damages of R15 000 to a customer. The claim arose due to a fault in a hired car that was involved in an accident. The customer had suffered injuries and had claimed damages of R15 000. On the advice of its legal adviser, Rent-a-car (Pty) Limited, had not disputed the claim, but merely settled the claimed amount of damages. Legal costs incurred were R2 500. 

Required: State whether the R15 000 damages paid and the R2 500 legal expenses incurred would be deductible in the determination of its taxable income.

Answer rating: 100% (QA)

In many jurisdictions including South Africa the deductibility of damages and legal expenses for a b... View the full answer