Wise – Tax Court of Canada finds no immediate taxable benefit to a landlord-shareholder from improvements made to the leased building by the tenant-corporation

An individual leased a building under a 5-year lease with a 5-year renewal option to a corporation (VMS) wholly-owned by her and her son. VMS then paid for substantial renovations to the building.

Smith J referenced the principle in Kennedy that “Where a tenant improves the leased premises, the extent to which, if at all, the improvement confers a benefit on the landlord will depend on the extent to which the improvement increases the value of the reversionary interest,” and then found that, here, no taxable benefit should be recognized until the termination or maturity of the lease, in which event the residual value of the reversionary interest of the taxpayer would have to be valued.

Neal Armstrong. Summaries of Wise v. The Queen, 2019 TCC 196 under s. 15(1) and General Concepts – Effective Date.