Capital Lease for Tax Purposes?

Howco

Junior Member

Join Date: Jan 2014

Posts: 18
#1

Capital Lease for Tax Purposes?

01-13-2014, 12:28 PM

Taxpayer acquires heavy equipment with a lease. FMV is $73,000. Taxpayer makes 60 monthly lease payments for $854/month, then has optional final payment at end of lease term for $24,000, when FMV is expected to be $30,000.

Can this equipment be capitalized for income tax purposes?
Tags: capital lease
BOB W

Senior Member

Join Date: Jun 2005

Posts: 4060
#2

01-13-2014, 04:01 PM

When lease buy out exceeds 10% of the FMV at the time the lease started, then it is a lease. The purchase price here is considered a used equipment purchase for the amount paid, 24,000. I don't think FMV matters at the time of option to buy.

Last edited by BOB W; 01-13-2014, 04:08 PM.

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