| 19(1) | File No. 5-8157 |
| Peter Lee | |
| (613) 957-2745 |
August 22, 1989
Dear Sir:
Re: Deferral of Leasing Income
We are writing in reply to your letter of may 29, 1989, wherein you requested our opinion with respect to a deferral of business income from the leasing of property under a true lease.
In our opinion if the first payment under a true lease is a large downpayment that has the quality of income form a business and is not merely the receipt of a prepayment of future lease payments, then it is business income for the purpose of section 9 of the Act. Paragraphs 12(1)(a) and 20(1)(m) would not be applicable and for tax purposes this leasing income could not be deferred and amortized over the term of the true lease. It would be a question of fact whether a particular payment had the quality of income. In each case the actual lease agreement would have to be examined.
This opinion is not an advance income tax ruling and accordingly is not binding on the Department. We apologize for the delay in replying to your query.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate