In providing background on the announcement in Income Tax Technical News No. 5 of the withdrawal of IT-233, CCRA stated:
[T]he purpose of the guidelines set out in this Bulletin was to prevent abuses through the use of lease agreements in situations where the parties involved in a transaction intended, in substance, to make a sale. The position taken in paragraph 3 of the Bulletin was based on the case law at the time, in particular Foster (51 DTC 232), Lagueux et Frères inc (74 DTC 6569) and Chibougamau Lumber (73 DTC 134), not GAAP. …
… [T]he question of whether a contract is a lease agreement or a contract of sale should be resolved on the basis of the legal relationships created by the terms of an agreement, rather than by an assessment of the underlying economic reality (as indicated by GAAP). Consequently, in the absence of a sham, we are of the view that a lease agreement is a lease agreement and a sale agreement is a sale agreement.