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CLFP - CLASS REVIEW STUDY Q&A
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CLFP - CLASS REVIEW STUDYWhen should lessor register as foreign corp? - ✅✅-Within a state ...
Good - stock of them
Services offered
Inspection or repair of property
Office/employees
Negotiated contracts
What is dode of Hammurabi? - ✅✅
-- 1750 BC
- Acknowledges leasing of personal property in his code of laws
- First record of leasing law
Early examples of true lease? - ✅✅-- Phoenicians shipping experts
- charters covered economic life of ships
- lessee to assume benefits and obligations of ownership
What is Statue of Whales? - ✅✅-- 1284 AD
- leasing personal property
- 1571 defined who owned the lease property
What is Philadelphia Plan? - ✅✅ -- 1700's railroads companies only afford
tracks
- Finance from private investors for locomotives/cars
- equipment trusts
- precursor of today conditional sale contract
When & how did Independent Leasing Start? - ✅✅-- 1900's
- Offer short term contracts/leases
- lessor retain title
- rail cars would be returned at end
- beginning of true/operating lease
- third party leasing companies
What is definition of captive? - ✅✅-- sub of mfg. primary purpose to finance
parents product
What is the benefit of captive? - ✅✅-- Sales aid
- market control
- product differentiation
,- Increase gross margin
- Ongoing customer contact
Why did lease re surge in 1950's? - ✅✅ -- government stimulate economy
after WWII
- advance in technology in business equipment
- IRS 167
How does IRS 55-540 define true lease? - ✅✅-P - payment exceed FMV -
NOT
A - automatic titletransfer - NOT
I - interest contained in payment - NOT
N - nominal purchase option - NOT
E - equity in lease - NOT
E - excessive lease payments - NOT
What is different between FASB 13 and IRS 55-540? - ✅✅--FAB 13 -
defines operating lease - ACCT
- IRS 55-540 - defines tax lease - TAX
What is FASB 13? - ✅✅ -- 1976 Financial Accounting Standard Board
- Issued statement 13
- Set criteria by which to classify a lease capital/operating
- defined treatment on financial statements
How does FASB 13 define an operating lease? - ✅✅-B - bargin purchse
option - NOT
E - economic useful life > 75% - NOT
A - automatic title transfer - NOT
P - PV of payments (no resid) > 90% of FMV - NOT
What is AMT? - ✅✅ -- Alternative Minimum Tax
- pay greater of regular tax or AMT
- limits depreciation benefit
- prompted growth in operating lease (lessee)
What is definition of Lease - ✅✅ -- a transaction in which use and
possession but not title to tangible property, is transferred for consideration
- USE AN POSSESSION
- NOT TITLE
, - TRANSFERRED FOR CONSIDERATION
What are the key "from whose eyes" comparisons? - ✅✅-- lessee vs. lessor
- operating vs capital (accounting)
- tax vs. non-tax (tax)
- true lease vs. secured transaction
What is ASC 840? - ✅✅-- Accounting Standard Codification 840
- updated FASB 13
Key Elements of Lease Transaction? - ✅✅-- lessee must sign
- lessor must sign
- paid invoice is transfer of ownership
- paid invoice is not transfer of title
What is a Finance Agreement? - ✅✅-- EFA
- Installment Sale
- titleholder and user are the same
What is a single investor lease? - ✅✅-- tow parties
- lessor
- lessee
What is third party lease? - ✅✅-- three parties
- lessor
- lessee
- dealer/vendor
What is Section 38? - ✅✅ -- IRS Section 38
- defines personal property that can be leased as depreciable property
What is IRS 179? -✅✅-- tax deduction loaded to the front of the lease
What is Leveraged Lease? - ✅✅-- non recourse
- three parties - lender, funding source. lessee
- lendor assigns rights to funding source
- tax oriented benefit to lender
- lender responsible for maintenance, insurance & tax
- net investment declines and rises over time
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