Where there is a real estate lease with a purchase option, is a portion of the rent paid under a lease with a bargain purchase option allocated to the option? CRA responded:
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.
The CRA has not issued guidelines to determine the amount to be allocated to a bargain purchase option, and … does not intend to issue such guidelines.