CRA finds that compensating a tenant for temporary displacement from a rental property being improved and repaired by the landlord may be a current deduction

A tenant was compensated, as required under the Quebec Civil code, for the expenses incurred as a result of being required to vacate the leased premises for one month in order for major work to be done on the premises – some of which was for capital expenditures and the balance being currently deductible as being to repair normal wear and tear.

Regarding whether the compensation payment was currently deductible, CRA indicated that this was a question of fact on which it could not conclude, but nonetheless suggested:

[I]n a context where the landlord pays compensation to his tenant because of his obligations under the Civil Code of Québec, this element could then be considered dominant and the compensation could be considered a current expense.

Neal Armstrong. Summary of 2 November 2023 APFF Roundtable, Q.7 under s. 18(1)(b) – capital expenditure v. expense – improvement v. running expense.