An Agreement Between Zenbrand Foods and Bennett Leasing, with Zenbrand

Multiple Choice

An agreement between Zenbrand Foods and Bennett Leasing, with Zenbrand as the lessee andBennett as the lessor, contained the following conditions, among many:Zenbrand's annual lease payment was set at $10 755 for a term of 5 years. At the end of the lease term, the ownership of the leased asset would automatically be transferred to Zenbrand unless Zenbrand had already exercised the option to buy the asset from Bennett at fair market value during the lease term. Canada Revenue Agency ruled that the agreement was not a lease but a conditional sale arrangement. Which of the following reasons could have led Canada Revenue Agency to make such a ruling about this agreement?

A) The lessee automatically receives ownership of the asset at any time in the leasing period, including at the end of the lease.
B) The lessor retains ownership of the asset at the end of the lease
C) The lessee has the option to buy the asset at fair market value at end of the lease
D) The lessor may sell the asset to a third party at the end of the lease