| 24(1) | 5-901523 |
| T. Murphy | |
| (613) 957-2747 | |
| EACC9383 |
Attention: 19(1)
July 25, 1990
Dear Sirs:
Re: Lease v. acquisition of property for purposes of the Income Tax Act (the "Act")
We are writing in reply to your letters of April 19 and June 25, 1990 to the Charlottetown District Office wherein you requested that officials of the district office review a blank lease agreement 24(1) and confirm whether 24(1).
As the situation outlined in your letter involves an actual situation with identifiable taxpayers, we are unable to respond to your request except in the context of an advance income tax ruling. The procedures for making such a request are outlined in Information Circular 70-6R, a copy of which is attached for your reference. The current rulings fee is $80 per hour and requests for rulings should include a deposit of $400.
Should you decide to request an advance income tax ruling on behalf of your client, in addition to a copy of the blank lease agreement, the actual details of the proposed lease (i.e., the information that would be included on the first page of the lease agreement) must be included in your request.
We understand that the district office has provided you with a copy of Interpretation Bulletin IT-233R. IT-233R details the general position of the Department on the circumstances in which a transaction structured as a lease would be regarded as a lease or as an acquisition of property for purposes of the Act. This determination is significant, since capital cost allowance and investment tax credits associated with a particular property accrue to the owner of that property. In leasing transactions, it is the Department's view that an agreement between the parties can contemplate only one owner of the property in question. Where the transaction is a lease only the lessor is entitled to the capital cost allowance claim and any related investment tax credits. Conversely, where it is determined that the agreement results in a disposition and acquisition of property for the purposes of the Act, only the party acquiring the property will be entitled to the capital cost allowance and investment tax credits in respect of the particular property.
We hope our comments are of assistance to you. We would be pleased to review your client's proposed transaction following receipt of an advance income tax ruling request prepared in the form described in Information Circular 70-6R.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate
c.c. Mr. Herb Terris A/Chief of Audit Charlottetown District Office
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