CRA ignores its archived Bulletin on lease cancellation payments

IT-359R2 (Archived) dated 20 December 1983 states that unless "renting property forms part or all of a business being carried on" by the tenant, an "amount received by a tenant… from a landlord, permitting the cancellation of a lease is a capital rather than an income receipt to the recipient."

Crisp writing like this is an embarrassment to CRA a generation later. When asked about the treatment as an income or capital receipt of a lease cancellation payment received by a tenant, CRA ignored IT-359R2 and referred instead to the general discussion in IT-365R2, paras. 8 and 9 of the surrogatum principle.

Neal Armstrong. Summary of 23 June 2014 T.I. 2014-0519401E5 under s. 9 – compensation payments.