Electing Tax Benefits in Leasing Transactions

Abstract:     
This article recommends allowing a lessor and a lessee to decide between themselves which party will be entitled to the tax benefit associated with the ownership of the leased property. It describes why the current linkage of tax benefits to property ownership is economically inefficient and disadvantageous to the parties and to the economy as a whole. Existing law diminishes the intended effect of tax incentive legislation, reduces a firm’s cash flow and reported earnings, distorts competition and decision making, and inhibits investment in efficient business assets. The proposed election addresses these shortcomings, while not violating anti-avoidance tenets of taxation.

Number of Pages in PDF File: 12

Keywords: tax, taxation, tax benefit, leases, real property, property, tax incentives, tax law, law and economics

JEL Classification: E62, H20, H25, H29, K00, K11, K34

Accepted Paper Series