Sandy leases a building for 15 years and signs a lease agreement for 15 years without any renewal options.

Tom also wanted to lease a similar type/size building for 15 years. However, he secures the right to lease the building for 15 years by signing a 3-Year lease with 2 renewable option periodsone for 2-Years and a second for 10-Years

Both Sandy and Tom are expecting to make significant profit from their businesses. Both Sandy and Tom incur same leasehold improvement costs at the beginning of the lease. Both Sandy and Tom wanted to claim maximum CCA on the leasehold improvements. Explain the tax treatment of the leasehold improvements to both Sandy and Tom. Which taxpayer has signed the better lease? Explain.