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Lease Cancelation Payment Calculation - Rental

According to CRA,  paying a tenant to cancel a lease is a claimable expense. However the calculation they have on their site doesn’t make sense. 
re: 

Calculation of the amount of the cancellation payment you can deduct if you made the payment in the year

Cancellation payment × Number of days to the end of the year when payment is made ÷ Number of days left on the lease.

 

so in my case, payment $5000 was made Feb 15, 2023, lease was valid til Oct 1, 2023. Based on the calculation provided by CRA: $5000x(319/272) =$5863

 

it makes no sense? Should one assume that if time remaining in the year is greater then time remaining on the lease then it would be a 100% claim of $5000 ?  Just doesn’t add up , any insight ? 

 

 

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Accepted Solutions
DavidD66
Expert Alumni

Lease Cancelation Payment Calculation - Rental

The lease termination payment is an expense incurred in ordinary course of business.  You can deduct what you paid - $5,000.  You can't deduct something you didn't pay, and you should deduct the full amount that you paid - no more, no less.  Claim an expense deduction for $5,000.  

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2 Replies
DavidD66
Expert Alumni

Lease Cancelation Payment Calculation - Rental

The lease termination payment is an expense incurred in ordinary course of business.  You can deduct what you paid - $5,000.  You can't deduct something you didn't pay, and you should deduct the full amount that you paid - no more, no less.  Claim an expense deduction for $5,000.  

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

Lease Cancelation Payment Calculation - Rental

David, totally agree, I had no intention of claiming more then what I actually paid, but the example provided by CRA could cause issues and really wanted clarification. 

thanks again 👍

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