Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Are lease cancellation payments deductible under 8(1)(h.1)?
Position:
No
Reasons:
Vehicles are not being replaced by the employee
970490
XXXXXXXXXX C. Tremblay
Attention: XXXXXXXXXX
May 8, 1997
Dear Sirs:
Re: Lease Cancellation payments for automobiles
This is in reply to your letter of February 20, 1997, wherein you seek our comments regarding a lease cancellation payment by sales representatives who presently lease automobiles for the purpose of employment but will be furnished automobiles in the near future by their employer. You have asked whether the lease cancellation payment incurred by the sales representatives will be an expense deductible by the sales representatives pursuant to paragraph 8(1)(h.1) of the Income Tax Act (the "Act").
The situation outlined in your letter relates to specific proposed transactions. It is the practice of this Department to comment on such transactions only by way of advance ruling. However, we can provide you with the following general comments which we hope will be of assistance to you.
Generally motor vehicle expenses incurred for travelling in the course of an office or employment pursuant to paragraph 8(1)(h.1) of the Act include such operating expenses as car washes, oil, grease, repairs, license, insurance and "eligible" lease costs. Interpretation Bulletin IT 522 provides further discussion of expenses permitted under section 8 of the Act in determining employment income. In our view, where an automobile is not being replaced by an employee, a lease cancellation payment incurred by the employee to terminate a lease would not meet the provisions of paragraph 8(1)(h.1) of the Act. Accordingly, in our view, an employee who under a contract of employment is no longer required to furnish a vehicle in the performance of his duties would not be permitted to deduct "eligible" lease costs.
The forgoing represents our general views with respect to the subject matter of your letter, however, the facts of a particular situation may result in a different conclusion. As indicated, these opinions are not rulings and in accordance with the guidelines set forth in Information Circular 70-6R3 they are not binding on the Department.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1997
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1997
Email this Content