Holdco acquires an automobile and leases it to a related corporation (Opco) at a fair market value rent, with Opco making the automobile available to one of its employees. Element C in the s. 6(2) formula appears to contemplate that the cost of the automobile to a person (Holdco) related to the employer is to be taken into account – but 2014-0529991E5 appears to indicate that the leasing cost to Opco should instead be used. Should Opco use its leasing cost or Holdco’s cost for standby charge purposes? CRA responded:
In a situation where a lease and purchase are involved, the wording of the formula in subsection 6(2) requires that the cost of the automobile be added to C and that the leasing cost be added to E to calculate the reasonable standby charge for an automobile made available to an employee.
… This situation has been brought to the attention of the Department of Finance.
In specific situations, the CRA concluded that the reasonable standby charge should be based on the cost or the leasing costs of the automobile to the person who made the automobile available to the employee. In the example submitted … the CRA could consider only the leasing cost that Opco pays to Holdco for the purposes of the formula set out in subsection 6(2).