OPCO constructed long-term care facilities comprising nursing homes and assisted-living facilities (collectively, the "Facilities") and sold them to LESSOR, which completed construction, and leased them back to OPCO.
CRA found that as OPCO's supply made under a Resident Admission Agreement to a nursing home resident is a supply of a service, OPCO does not make any supplies that are exempt under s. 6, so that lease payments for such Facilities are not exempt under s. 6.1
In determining whether the exemption in s. 6.1 applies to any particular lessor's supply, it is only the lessee's supplies of property (i.e., residential units) that must be considered and not supplies of services by it to the residents which must be taken into account in determining whether the head lease is exempt under section 6.1, so that the lease of the assisted-living Facilities would be exempt if the "substantially all" test was satisfied on this basis. If any portion of the Facilities includes real property that does not form part of the residential complex e.g., any part that is leased to a third party for the operation of a hair/barber shop, any lease payment attributable to that part of the Facility is taxable.
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