CRA recharacterizes a portion of the lease payments under a lease with a bargain purchase option as consideration for the option

Regarding a lease of a truck tractor with a term of 48 months and a bargain purchase option at maturity, CRA indicated that the monthly rental payments should be allocated between deductible rental payments for the use of the vehicle and consideration for the option, which would be added to the adjusted cost base of the option. (For the same policy applied to a realty lease, see 2010-0370561E5 F.) Given its acceptance of Shell, the bargain purchase option would not cause it to recharacterize the lease as a purchase by the lessee of a depreciable asset under a secured loan.

Neal Armstrong. Summaries of 17 February 2021 External T.I. 2018-0768051E5 F under s. 20(1)(c)(ii), s. 68, s. 16.1(1) and s. 13(5.2).