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EE 4: Ownership of lessee’s improvements: lessee
or “Renters are treated as owners of improvements they make to rented land”
You could also call this:

“Passing on ownership of improvements when a lease changes hands”

You might be renting land and decide to build something on it or make it better. If you do this, you can get some money back from the government for the cost of the building or improvement over time. This is called a deduction for depreciation loss.

If you stop renting the land and someone else takes over your lease, they might pay you for the building or improvement you made. When this happens, the new person is treated as if they own the building or improvement from the moment they pay you for it.

This also works if you didn’t build or improve anything yourself, but you were getting money back for something a previous renter built or improved. If you pass your lease to someone else and they pay you for that building or improvement, they become the owner when they pay you.

Remember, this only applies when you’ve been allowed to claim those deductions for depreciation loss, and when the new person actually pays you for the building or improvement.

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Next up: EE 6: What is depreciable property?

or “Property that loses value over time when used for business or taxable activities”
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Part E Timing and quantifying rules
Depreciation

EE 5Ownership of lessee’s improvements: other person

  1. This section applies when—

  2. a lessee of land incurs expenditure during the term of the lease in erecting a fixture on the land or making an improvement to the land; and
    1. the lessee has been allowed a deduction for an amount of depreciation loss for the fixture or improvement; and
      1. the lessee disposes of their interest in the lease to another person; and
        1. the other person pays the lessee for the fixture or improvement.

          1. This section also applies when—

          2. a lessee of land has been allowed a deduction for an amount of depreciation loss for a fixture on the land, or an improvement to the land, that a previous lessee erected or made; and
            1. the lessee disposes of their interest in the lease to another person; and
              1. the other person pays the lessee for the fixture or improvement.

                1. The other person is treated as owning the fixture or improvement from the time at which they pay the lessee for it.

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