A client has entered into a lease agreement to purchase $19M in equipment and $ 6M in software. The buyout at the end of the lease term of 66 months is $ 101.00. Isn't this really as asset purchase as the residual value is not representative of the true remaining value. I'm inclined to capitalize the purchase and write off the "interest expense" as one would with a true installment loan agreement. What say you?
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You have it right. Capitalize and depreciate. 179 to the max if eligible.Originally posted by rsandy View Post
End of lease buyout has to be greater than 10% of purchase price to allow handling it as a lease.This post is for discussion purposes only and should be verified with other sources before actual use.
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Capital Equipment
I agree with Bob W. The "payoff" is so nominal that this is clearly a financing arrangement disguised as a lease.
Not so sure this qualifies as s.179 if it is not paid for in cash during course of the year.Comment
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Asset
It is an asset and it is qualified for Section 179. Just as a contractor buying a dumptruck and the loan is for 5 years they can still 179 the truck even if it is not all paid in one year.I would put a favorite quote in here, but it would get me banned from the board.Comment
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No Sec 179
The amount purchased exceeds the limitation amount. For 2007 the limit is $625,000.Comment
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