Where there is a real estate lease with a purchase option, is the landlord deemed to have disposed of the option when granting it, and is a portion of the rent paid under a lease with a bargain purchase option allocated to the option? CRA responded:
Subject to subsections 49(3) and 49(3.1), subsection 49(1) provides that, for the purposes of Subdivision c … the granting of an option represents a disposition of property whose adjusted cost base is nil. …
Where the landlord receives a payment during the term of a lease with a bargain purchase option … the landlord must allocate a portion of that amount to the lease and another portion to the purchase option, where that option has a value. …
[A] method of allocating a payment between the lease and the proceeds of disposition of the option that unduly defers the inclusion of the rent in the lessor's income will not give an accurate picture of profit.