CRA states that a shareholder benefit arising on a corporate tenant improvement must be estimated even if reimbursement for the improvement is required on lease termination

In IT-432R2, CRA states (based inter alia on Kennedy and Ginter) that if a corporate tenant improves a building owned by its shareholder, a shareholder benefit arises at that time based on the present value of the increase in the shareholder/landlord’s reversion.  But what if under the lease the corporation at lease end must be repaid by its shareholder for the value of the improvements?

CRA was unwilling to discuss the mitigation or elimination of the shareholder benefit that thereby arises and instead stated that "the extent to which the reimbursement would reduce the present value of the shareholder benefit under subsection 15(1) will depend on the relevant circumstances."

Neal Armstrong.  Summary of 24 September 2014 T.I. 2014-0522261E5 under s. 15(1).