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Leasing is a very lucrative source of financing for certain companies needs, including corporations and small- to medium-sized businesses. This is because the Internal Revenue

Leasing is a very lucrative source of financing for certain companies needs, including corporations and small- to medium-sized businesses. This is because the Internal Revenue Service (IRS) allows the lessee to deduct the lease payments and the lessor can deduct interest payments on any debt used to finance the asset leased. To be able to deduct lease payments, IRS guidelines must be followed. An agreement that meets IRS requirements to qualify as a genuine lease is called ____.

Jessica is a lawyer at Leaseonic Corp. She is evaluating the companys current lease agreements. Jessica recently hired an intern, Michael, and assigned him the task of listing the provisions for tax guidelines related to lease contracts. Jessica needs to check and find mistakes in the provisions that Michael listed.

Of the following points outlined in Michaels document, which are correct? Check all that apply.

The equipments residual value at the expiration of the lease should be at least one fifth of its value at the start of the lease.

Equipment with a 20-year life cannot be leased for more than 16 years.

The lease agreement can restrict the use of the equipment so that only its lessee or a related party can use the asset after the expiration of the term.

The leased equipment should not be a limited use property, which means that the equipment should be available for use by anyone at the end of the lease.

The lessee or any other party has the right to purchase the equipment at the expiration at a predetermined fixed price specified in the lease contract.

One beneficial feature of a structured lease agreement is deductions that can provide greater tax deductions than otherwise might be available if CCA was being claimed on a purchase option.

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