The Company expects important rate case issues, including the incorporation of any federal income tax requirements to structure the leases as true leases
, the regulatory method to update lease payments between rate cases and economic issues such as the allowed return on equity, income tax allowance and approved lease rates, to be addressed over the remaining course of the rate case.
Single-investor leases and leveraged leases are two categories of true leases. The first category is a two-party transaction in which the lessor purchases the leased equipment with its own funds.
Considering the existing literature, structured leasing transactions can fall within one of the two following categories: (i) leveraged leases (or tax or true leases); and (ii) synthetic leases (or synthetic structured leases).
the full priority treatment of true leases
promotes efficient outcomes.
Mixing the use of true leases
and conditional sales leases can help a business avoid exceeding the $800,000 cap because leased equipment does not qualify for Section 179.
You need to determine whether, for tax purposes, the leases are (a) true leases
, in which case the lessor recovers its tax basis via depreciation deductions, or (b) leases evidencing a financing or sale, in which case the lessee depreciates the equipment cost and the lessor's tax basis is in the receivables.
7) The agreements were true leases
for federal income tax purposes;
As Graham, Lemmon, and Schallheim point out, operating leases are more likely than capitalized leases to qualify as "true leases
" under Internal Revenue Service guidelines.
Unfortunately, for true leases
, the assets on the balance sheet are vehicles, not receivables.
However, for tax purposes, the leases were treated as operating leases (true leases
Corporate financial professionals should be aware of at least four types of equipment leases: the standard finance lease, the true (or operating) lease, the fixed-purchase option lease, and the "convert-i-lease." The last two are also classified as true leases
for tax purposes and operating leases for financial accounting purposes, but represent leasing options with much greater flexibility and less uncertainty than the first two options.
The question of whether these are true leases
or loans is often raised.