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Posted by hhelman on April 8, 2008, 11:52 pm
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> > Isn't it as simple as this?
>
> It's never cut-n-dry. Who owns both companies?
>
> > The company that owns the equipment gets to depreciate it.
> > Just like a rental, whoever owns the house gets to
> > depreciate it and enter it on their Schedule E.
>
> Not if I own the house and I live there.
>
> The problem, as I see it without a ton of research, is the sharing of
> profits in the production (use) of the equipment. That cracks that
> unrelated barrier, enough for me to want to look it up (I'm not gonna do it,
> but you should).
>
> > The rent that the owner charges for leasing the property
> > will include the tax break of depreciation. The owner
> > would have to report the rental/leasing income, and the
> > company that leases the property will deduct it as an
> > operating cost.
>
> In an "at-arms-length" transaction, yes to the first half, and maybe to the
> second half. Manufacturers might be required to capitalize their expenses
> of production into finished goods inventory.
>
> > The "one half of 1% (.005) interest" seems irrelevant.
>
> As I said, that cracks the "unrelated" barrier, enough for me to want to
> look it up (I'm not gonna do it, but you should).
>
> If both companies are related, then it probably won't work like you want it
> to.
>
> --
> Paul A. Thomas, CPA
> Athens, Georgia
>
> --
> << ------------------------------------------------------- >>
> << The foregoing was not intended or written to be used, >>
> << nor can it used, for the purpose of avoiding penalties >>
> << that may be imposed upon the taxpayer. >>
> << >>
> << The Charter and the Guidelines for submitting posts >>
> << to this newsgroup as well as our anti-spamming policy >>
> << are atwww.asktax.org. >>
> << Copyright (2007) - All rights reserved. >>
> << ------------------------------------------------------- >>
Gentleman,
Thank you for responding. The answer to your questions:
1. It is an "at-arms-length" transaction
2. The companies are unrelated
For further understanding of the situation:
The equipment is industrial in function and does NOT produce a widget
The Term of the lease is long term (20 years)
The company leasing the equipment (owner) buys the equipment from a
manufacturer
The company then turns around and leases the equipment to unrelated
entities
The reason the company retains a very slight production right on the
equipment is to ensure that the lessee cannot claim ownership (IRS)
(is this necessary)
There is a question about COGS deductions for the owner of the
equipment (leasing revenue minus the cost of the equipment ). Can the
owner of the equipment take COGS and depreciation deductions
In advance thank you for responding
========================================= MODERATOR'S COMMENT:
Please delete unnecessary text from the prior message when responding.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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