,canada ,cu/oms                       #a
& ,rev5ue ,ag5cy

          ,9t]pret,n ,bullet9
    
,subject3 ,9come ,tax ,act
  ,prepay;ts ( r5ts
,numb]3 ,,it-#bfa;,r
,date3 ,may #bj1 #aihj
,ref];e3 #i7#a71 #ah7#a77a7 7al p>agraph
  #ah7#a77b7 & subp>agraph
  #bj7#a77m77;iii77

  ,? bullet9 c.els & replaces ,9t]pret,n
,bullet9 ,,it-#bfa dat$ ,novemb] #c1
#aige & ,special ,rel1se dat$ ,decemb]
#e1 #aigg4

#a4 ,? bullet9 d1ls ) prepay;ts ( r5t &!
  tr1t;t (! prepay;ts = tax purposes4
#b4 ,x is "s"ts di6icult 64t+ui% 2t a
  pay;t (a premium &a prepay;t ( r5t4 ,!
  nature & tr1t;t (a premium is 4cuss$ 9
  ,,it-#cei1 ,premium on ,l1ses4
                                      #a
              ,,it-#bfa;,r           a#a
#c4 ,a pay;t is a prepay;t ( r5t ": a
  t5ant makes a pay;t 6his l&"l &1 z a
  result pays no r5t or pays r5t at a
  rate t is less ?an he wd o!rwise h _h
  6pay4 ,! pay;t ( an am.t =! "r
  6assume1 f ! payee1 an exi/+ l1se ^:
  r5tal is 2l curr5t m>ket values is
  3sid]$ a premium4
#d4 ,9 det]m9+ :e!r a pay;t is a premium
  or is prepd r5t or 3ta9s an ele;t (
  bo?1 ea* case m/ 2 3sid]$ 9 ! 3text (!
  factual circum/.es (! transac;n4 ,x is
  ! sub/.e (! transac;n t det]m9es :at !
  pay;t is r ?an ! "n agre$ on 0! "pies
  6describe t pay;t4
#e4 ,z a g5]al rule taxpay]s m/ use !
  a3rual me?od ( a3.t+ 6calculate 9come
  f a busi;s or prop]ty1 un.s ! ,9come
  ,tax ,act provides o!rwise 9 respect (
  specific items ( 9come or exp5se4



                                      #b
      ,r5t ,prepay;ts ,made ,prior   b#a
        6#aigi 7p>agraphs #f-g7
    
#f4 ,:ile r5t prepay;ts >e g5],y subject
  6! -;ts 9 #e abv1 ! foll[+ -;ts
  summ>ize & cl>ify ! ,de"p;t's posi;n )
  respect "!to4 ,9 ! pa/1 :5 calculat+
  9come f prop]ty "s 9dividual taxpay]s
  deduct$ prepd r5t 9 ! fiscal p]iod 9 :
  x 0 pd r ?an 9 ! p]iod t x b5efitt$4
  ,! ,de"p;t w a3ept ? practice = pay;ts
  : 7 made prior 6,decemb] #e1 #aigg4
  ,": a prepay;t ( r5t 0 made af
  ,decemb] #e1 #aigg & prior 6#aigi & 0
--------------------------------------#b
  deduct$ 9 ! ye> ( pay;t1 x w 2 a3ept$
  only if ! 5tire prepay;t 0 =a p]iod (
  five ye>s or less4
#g4 ,! ,decemb] #e1 #aigg ,special
  ,rel1se 6,,it-#bfa requir$ t r5t prepd
  0s* taxpay]s =a p]iod 9 excess ( five
  ye>s 2 capitaliz$4 ,": s* a taxpay]
  has adopt$ ? tr1t;t1 x w 2 a3ept$ 9
  respect ( s* r5t prepay;ts made 2f
  #aigi4 ,! ,de"p;t w al a3ept !      #c
              ,,it-#bfa;,r           a#b
  capitaliz,n ( prepd r5t made 2f #aigi
  0s* taxpay]s 9 respect ( p]iods less
  ?an five ye>s4 ,h["e1 ": a taxpay] has
  made a prepay;t ( r5t 2f #aigi & any
  "p ( t pay;t has be5 nei deduct$ nor
  capitaliz$ 9 a3ord.e )! prec$+
  guidel9es1 z evid;ed 0returns fil$
  prior 6! date ( ? bullet91 t bal.e m/
  2 allocat$ ov] ! rema9+ life (! l1se
  plus all renewal p]iods un.s ! t]ms (!
  l1se 9dicate t ! pay;ts relate 6%ort]
  p]iods4

         ,po/ #aigh ,prepd ,r5t
             7p>agraph #h7
    
#h4 ,": a taxpay] makes a r5t prepay;t
  af #aigh1 he m/ amortize x ov] ! life
  (! l1se plus all renewal p]iods un.s !
  t]ms (! l1se cle>ly 9dicate t !
  prepay;t relates 6a %ort] p]iod4
  ,h["e1 9 -put+ 9come f a f>m+ or fi%+
  busi;s1 a taxpay] may elect 6use ! ca%
                                      #d
              ,,it-#bfa;,r           b#b
  me?od & may1 "!=e1 deduct a r5t
  prepay;t 9 ! ye> x is pd4

        ,l&"ls 7p>agraphs #i-aj7
    
#i4 ,": a l&"l rcvs a prepay;t ( r5t :
  repres5ts 9come f a busi;s1 he m/
  9clude ! full am.t (! prepay;t 9 -put+
  8 9come =! ye> ( receipt 0virtue (
  p>agraph #ab7#a77a74 ,h["e he may
  claim a res]ve =a r1sona# am.t
  pursuant 6subp>agraph
  #bj7#a77m77;iii74 ,! r1sona# am.t = ?
  purpose at ! 5d (a tax,n ye> wd 2 t "p
  (! r5t rcvd 9 adv.e1 & 9clud$ 9 !
  9come (! taxpay] = t ye> or a prior
  tax,n ye>1 : relates 6! p]iod ( "t af
  ! 5d (! ye> = : ! posses.n or use (!
  prop]ty m/ 2 made availa#4
#aj4 ,": a l&"l rcvs a prepay;t ( r5t :
  repres5ts 9come f prop]ty 7r ?an 9come
  f a busi;s7 & reports 8 9come on an
  a3rual basis1 9 a3ord.e ) g5],y a3ept$
  a3.t+ practice "! w 2 9clud$ 9      #e
              ,,it-#bfa;,r           c#b
  -put+ 9come =a "picul> tax,n ye> only
  t por;n (! r5t prepay;t t is =! use or
  posses.n (! r5t$ prop]ty = t ye>4 ,any
  bal.e (! prepay;t & any exp5ses relat+
  "!to wd1 ( c\rse1 2 reflect$ 9 -put+
  9come =! "picul> tax,n ye>s 6: !y
  relate4
















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