Under so-called “tax leases,” the lessor owns the equipment for tax-reporting purposes. “In a tax lease, the lessee is ‘trading’ the tax benefits of equipment ownership with the lessor for favorable payments and more flexible tax management,” noted Deborah Borow in Business First of Buffalo. “Depending on the lessee’s specific tax situation, this lease feature can significantly lower the total cost of equipment.”
Synthetic leases, meanwhile, are structured as a loan for tax purposes but as a lease for accounting purposes. “It allows corporations to acquire assets that are financed off the balance sheet while retaining the tax benefits of ownership,” said Borow.
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