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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

Suppose there were no IRS restrictions on what constitutes a valid lease. Explain in a manner that a legislator might understand why some restrictions should be imposed.

Summary Introduction

To Determine: The method that a policy-maker may recognize on the limitations that are obligatory.

Introduction: A lease is characterized as an agreement between a lessee and a lessor for the contract of a particular asset for a particular period on payment of determined rents.

Explanation

The method that a policy-maker may recognize on the limitations that are obligatory is as follows:

The lease payments, similar to devaluation, are deductible for tax reasons. In the event that a twenty-year asset were devalued over a twenty-year life, depreciation costs would be 5% (1/20) every year or maybe more if MACRS depreciation were utilized. In any case, if the asset were leased for, three years the tax deductions would be 33...

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