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:
1. rent free periods
2. lease inducement payments
Position:
1. no income or expense
2. amortization required over the term of the lease
Reasons:
1. position from 1993
2. new position for re-leases
951614
XXXXXXXXXX C. Tremblay
Attention: XXXXXXXXXX
December 5, 1995
Dear Sirs:
Re: Rent free Periods and lease inducement payments
This is in reply to your facsimile letter of June 15, 1995, requesting our current position on the above-noted subjects. We apologize for the delay.
The Department is 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 to pay rent in respect of that period, there is no income to be recognized by the landlord.
With respect to the current deductibility of tenant inducements, lease inducement payments relating to the initial lease of space in a project or building are to be deferred and amortized to income over the term of the related lease. Moreover, we are now of the view that inducement payments made to facilitate the re-leasing of space, whether or not to the same tenant, must also be amortized to income over the term of the related lease. This new position is based on the matching principle and the court decision rendered in Canderel Limited 95 DTC 5101 and 94 DTC 1133.
Accordingly, the previous position of the Department will no longer be applicable with respect to any lease inducement payments made to facilitate the re-leasing of space incurred after November 1995 other than those agreed to in writing prior to that date.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
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, 1995
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, 1995
Email this Content