A tenant had been annually renewing a lease of a condo since the time the condo was first leased in July 2013. The condo was sold in February 2019. The new owner, who wished to dwell in the premises, was not entitled to terminate the lease until effective July 2020. In consideration for the early termination of the lease, the new owner paid $15,000 to the tenant. S. 20(1)(z) provides for deductibility of the amount specified notwithstanding ss. 18(1)(a) and (h).
Is the $15,000 deductible in computing the new owner’s income under s. 20(1)(z) notwithstanding that the new owner wishes to inhabit the condo following the termination of the lease?
CRA stated:
Paragraph 20(1)(z) is applicable notwithstanding paragraphs 18(1)(a), 18(1)(b) and 18(1)(h). However, the amount to be deducted must be applicable wholly or in part to income from a business or property.
… In this case, the leasing activity does not appear to be free from personal aspects and it would be necessary to consider whether it is carried on in a sufficiently commercial manner so as to establish the existence of a source of income.