26 January 1990 Administrative Letter 74606 F - Training Material on Lease Cancellation Payments

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.

Training Material on Lease Cancellation Payments Your file #HBI 3933-9

This is in reply to your two memoranda both dated December 19, 1989 in which you asked us to review the training material on "Lease Cancellations Payments" which comments on the provisions of paragraphs  20(1)(z) and 20(1)(z.1) of the Income Tax Act.

Our review was based on the provisions of the Income Tax Act as they apply now.  No amendments are proposed currently.  We have ignored grammatical and typographical errors, language style and layout, unless they are believed to clearly result in incorrect or misleading information being given to readers.

Our comments are attached.  Other comments are noted directly in the training material.  If you wish to discuss our comments and suggested rewordings, please do not hesitate to contact Ms. Esta Mikhail.

Bernhard BuetowActing DirectorTechnical Interpretations DivisionLegislative and Intergovernmental Affairs Branch

Enclosure

EM/yp COR (memo) 6-A

Our Comments on Lease Cancellation Payments

20(1)(Z) and 20(1)(Z.1)

#1.       It may be helpful to add that under 18(1)(q) no deduction is allowed in computing income from a business or property in respect of lease cancellation occurring after December 1, 1982 other than a cancellation pursuant to an agreement in writing entered into before December 2, 1982.  This is the general rule. The provisions of 20(1)(Z) and 20(1)(Z.1) are merely two exceptions to the general rule.

#2.       It seems to us that where a lease cancellation is directly related to the disposition of property the lease cancellation would be caught under paragraph 20(1)(Z.1) and not 40(1).  Could this paragraph be deleted?  The comments on the application of subsection 40(1) may apply in circumstances commented on in IT-359R2 paragraph 11.  These circumstances do not arise now.

#3.       Could this preamble be replaces with the wording of 18(1)(q)?

#4.       The key words are "an amount not otherwise deductible".  The commentary does not relate to the key words.  We would suggest that the commentary explain that the amount is not otherwise deductible by virtue of the provisions of 18(1)(q).

#5.      We suggest the comments in IT-359R2 paragraph 13 on the meaning of "leased by him" be added.