Asked by Brittney Hayes on May 01, 2024
Verified
A fully taxable recapture exists if the lease provides the lessee with an option to purchase the asset at a bargain price.
Fully Taxable Recapture
The process whereby the IRS fully taxes the depreciation or deductions previously taken on an asset, typically when the asset is sold for a gain.
Bargain Price
A price that is significantly lower than the perceived value of an item or investment.
- Understand the financial impact on lessors and lessees, particularly concerning Capital Cost Allowance (CCA) recapture and terminal losses.
Verified Answer
ZK
Zybrea KnightMay 04, 2024
Final Answer :
True
Explanation :
If the lease includes a bargain purchase option, it is considered a financing arrangement and results in a fully taxable recapture of all prior depreciation deductions taken by the lessor.
Learning Objectives
- Understand the financial impact on lessors and lessees, particularly concerning Capital Cost Allowance (CCA) recapture and terminal losses.