GMAC received "support payments" from GMC in order to inflate the residual values stated in its leases of cars to GMC customers, thereby reducing the lease payments but resulting in a likely loss on lease termination. GMAC was obligated to pay GMC to the extent that the net amount of such losses was less than the support payments previously received.
Graham J found that the support payments were not earned until lease termination (when the repayment obligation could be quantified. GMAC argued that because the support payments were not earned when received, the exclusion in s. 12(1)(x)(v) for income receipts did not apply, so that s. 13(7.4) election to exclude those amounts from income, and apply them instead to the UCC of its Class 10 assets, had been validly made. Graham J found (at para. 40) that for the same reason that a support payment was unearned (i.e., there was "no legal right to keep the amount,") it also was not received for s. 12(1)(x) purposes. He also questioned (in f.n. 10) whether the s. 13(7.4) elections would have been available in any event because the "support payments were received to replace lost income rather than in respect of the cost of the vehicles."
See summaries under s. 9 – timing, s. 12(1)(x), s. 9 – compensation payments, and s. 9 – computation of profit.