The taxpayer, which had entered into an agreement with a property owner to develop the property as a commercial office development, paid just over $4 million in tenant inducement payments in order to get the project 85% leased.
Because the inducement payments thus could not “be correlated directly, or at least not principally, with the rents generated by the leases which they induced” (para. 65) (given that there were other current benefits that were generated such as obtaining permanent financing and earning performance-related fees), the taxpayer's method of expensing the payments in full achieved at least as accurate a picture, for tax purposes, of the taxpayer's financial position as would the method favoured by the Crown (amortization over the terms of the leases).