True Lease

A true lease refers to any type of lease arrangement where the lessor retains the tax benefits of ownership, and the lessee can claim lease payments as an operating expense.

Ownership rights are retained by the lessor, while the lessee would gain exclusive rights to use and possess the item being leased.

This can be for assets like equipment or real estate like office space.

It is also known as a tax lease because it passes the accounting requirements for the lessor to claim tax benefits like depreciation on the asset or property.

At the end of the leasing period, the asset or property is returned to the owner in good or original condition.

Because of the tax benefits that the lessor keeps, such leases tend to be of a lower rental compared to a non-tax lease.

A operating lease is a true lease. But a finance lease can either be a tax lease or non-tax lease.

In terms of equipment leasing, the lessee might be given the opportunity to purchase the asset outright by making a balloon payment.

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