Lease Buyout

[S T]

Taxpayer (Schedule C) purchased expensive office equipment and financed it through a lease purchase, which was capitalized, depreciated, and interest/principal allocated.

The cost carrying of the lease/purchase was so expensive, taxpayer exercised the "buyout option" to pay off the leasing company - $ 3,800 in 2016.

How to report the $ 3,800 buyout?

Thanks

Sandy

[Roland Slugg]

How to report the $3,800 buyout?

I'm guessing/assuming that the $3,800 was probably just slightly more than the amortized balance due on the note. I would allocate that portion of the $3,800 to zero out the note balance on the books, and charge the rest to interest expense.