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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
PRINCIPAL ISSUE:
Whether a lease cancellation receipt received by a landlord can be viewed as a prepaid rent for which a reserve under 20(1)(m)(iii) can be claimed.
Position TAKEN:
No
Reasons FOR POSITION TAKEN:
Cannot be considered a prepayment of rent where the lessee has no right to the possession or use of the lease property.
5-942801
XXXXXXXXXX L. Roy
Attention: XXXXXXXXXX
December 15, 1994
Dear Sir\Madam:
Re: Lease cancellation receipt
This is in reply to your letter of October 21 14, 1994 in which you requested our opinion on whether a lease cancellation receipt received by a landlord can be viewed as a prepaid rent for which a reserve under subparagraph 20(1)(m)(iii) of the Income Tax Act can be claimed.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R2, dated September 28, 1990. The following comments are, therefore, of a general nature only, and are not binding on the Department.
Where an amount is received by a landlord from a lessee and the lessee has no right to the possession or use of the lease property, it is our view that the amount received cannot be considered as a prepayment of rent.
Consequently, a payment received by a landlord from a tenant for the cancellation of a lease, which is considered to be income under section 9 of the Income Tax Act, is not subject to a reserve under paragraph 20(1)(m).
We trust the above comments will be of assistance to you. If you have any questions do not hesitate to contact us.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
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