CRA indicates that whether receipts are gross REIT revenue is informed by their accounting treatment
A mutual fund trust is the limited partner in a subsidiary partnership, which is undertaking the development and construction of a new multi-unit residential rental property, funded with equity contributions and loans.
"Gross REIT revenue” of an entity is defined as “the amount, if any, by which the total of all amounts received or receivable in the year (depending on the method regularly followed by the entity in computing the entity's income) by the entity exceeds the total of all amounts each of which is the cost to the entity of a property disposed of in the year.”
CRA intimated that it generally would not consider various amounts received by the partnership to be gross REIT revenue for REIT-test purposes where the amounts “would not be considered ‘revenue’ within the ordinary meaning of the term nor under the well-accepted business and accounting practices.” Accordingly, the following receipts would generally be excluded:
- loan proceeds and equity contributions to the partnership
- input tax credits
- the GST/HST new residential rental property rebate received on substantial completion and first occupancy
- volume discounts and rebates from suppliers
CRA noted that “[f]or accounting purposes, ITCs, the HST Rebate and volume discounts and rebates from suppliers would normally reduce the amount of the expense or the capital cost or adjusted cost base of the related property.”
Neal Armstrong. Summary of 22 February 2021 External T.I. 2018-0784661E5 under s. 122.1(1) – gross REIT revenue.