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 Issues:
Lease Cancellation payment
Position:
Gave general position in IT-359R2
Reasons:
May 13, 1996
PETERBOROUGH TAX SERVICES OFFICE HEADQUARTERS
M. P. Baldwin
Attention: Suzanne Burden (613) 957-8953
961258
Lease cancellation payment
This is in reply to your memorandum of April 9, 1996 in which you sent us a letter from XXXXXXXXXX requesting a technical interpretation with respect to the treatment of a lease cancellation payment made to the landlord from a tenant.
The situation described in your letter is an actual fact situation and as noted in paragraph 21 of Information Circular 70-6R2, the district tax services offices are responsible for providing written opinions on actual fact situations. Consequently, we are returning the documents sent to us and offer the following general comments which should help you respond to the client.
The issue of lease cancellation payments and their treatment for tax purposes is addressed in Interpretation Bulletin IT-359R2 and in particular paragraph 1 which states:
"A premium or other amount received by a landlord or tenant, as the case may be, as consideration for granting or extending a lease or sublease, permitting a sublease, or cancelling a lease or sublease is business income to the recipient if renting property forms part or all of a business being carried on."
The Interpretation Bulletin then goes on to state in paragraph 4:
"Amounts a landlord receives from a tenant for cancelling a lease or sublease always constitute income to the landlord."
Therefore, based on the above and the facts in the above noted letter, it is our opinion that the payment received from the tenant for the cancellation of the lease would constitute income to the taxpayer in the year and would be included in her income in the year the lease is cancelled.
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1996
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1996
Email this Content