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.
930127
XXXXXXXXXX
C. Tremblay
(613) 957-2744
Attention: XXXXXXXXXX
January 20, 1993
Dear Sirs:
Re: Landlords and Tenants - Rent-Free Periods
- This is in reply to your letter of January 6, 1993, concerning the tax treatment of both the landlord and the tenant during a rent-free period in a lease.
Our Comments
- At the 1990 Canadian Tax Foundation Round Table in Quebec City, the Department advocated CIPREC guidelines for rent- free periods. The Department has reviewed this tax treatment and is now of the view that where a rental agreement provides for a rent-free period and there is no legal obligation on the part of the tenant, whether such tenant is new or an existing tenant, to pay rent in respect of that period, there is no income to be recognized by the landlord.
- In the case of a tenant, where the lease agreement indicates that the tenant has a "rent-free" period, no rent is payable and no liability is incurred. Any imputed rent expense during the rent-free period would therefore be disallowed pursuant to paragraph 18(1)(a) of the Act.
We trust our comments will be of assistance to you
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
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© Her Majesty the Queen in Right of Canada, 1993
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© Sa Majesté la Reine du Chef du Canada, 1993
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