Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
| 24(1) |
File No. 5-9748 |
| |
T. Murphy |
| |
(613) 957-2747 |
19(1)
May 29, 1990
Dear Sirs:
Re: Technical Interpretation of paragraphs 20(1)(z) and 20(1)(z.1) of the Income Tax Act (the "Act")
This is in reply to your letter of March 8, 1990 wherein you requested our views on the deductibility of a lease cancellation payment made to tenants by a taxpayer, to obtain vacant possession of recently acquired land and buildings, with the intention of destroying the existing buildings and constructing a new building.
OUR OPINIONS
If a tenant's rights under a lease relate to both the land and the building, then in our opinion the lease cancellation payment would have to be apportioned between the land and the building. In other words, the lease cancellation payment would be viewed as consisting of two separate lease cancellation payments, one payment relating to the building and one payment relating to the land. Therefore, provided the amount is reasonable:
(i) that portion of the lease cancellation payment which relates to the building would generally be deductible by the landlord in the year the building was demolished pursuant to paragraph 20(1)(z.1) of the Act to the extent of the amount thereof (or in the case of capital property, 3/4 of the amount thereof) that was not deductible by him in computing his income for any preceding year pursuant to paragraph 20(1)(z) of the Act; and
(ii) that portion of the lease cancellation payment which relates to the land would generally be deductible by the landlord in accordance with the calculation in paragraph 20(1)(z) of the Act.
The opinions expressed in this letter do not constitute an advance income tax ruling and, as stated in paragraph 24 of Information Circular 70-6R, are not binding on the Department in respect of any transaction taxpayer.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate
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© Her Majesty the Queen in Right of Canada, 1990
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© Sa Majesté la Reine du Chef du Canada, 1990
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