Exclusions from capital cost of leasehold interest
6. Certain amounts paid by a tenant in respect of a lease are not considered to form part of the capital cost of a leasehold interest. Examples of these are as follows:
(a) an amount paid by a tenant to cancel a lease (see IT-359R2), and
(b) an amount paid by a tenant in lieu of rent or as a prepayment of rent (see IT-261R).
7. A leasehold interest does not include the cost of alterations or improvements made by the landlord of a property at the request of the tenant. Such costs are either expenses of the landlord or subject to capital cost allowance depending on whether they constitute a current expense or a capital expenditure.
8. When a tenant makes improvements and alterations to leased property and subsequently abandons them, they are not considered to have been acquired by the landlord as a gift, bequest or inheritance under paragraph 69(1)(c). The landlord is, therefore, not entitled to claim capital cost allowance in respect of such property.
