For purposes of this question assume that the described transaction is NOT in the ordinary course...

For purposes of this question assume that the described transaction is NOT in the ordinary course of business. If a lessee purchases the leased property from the lessor, improves the property, and then immediately after the improvements are completed re-sells it back to the lessor for a loss, how will such transaction be treated for tax purposes?

	A.	The loss on the sale is deductible in the year of the sale.
	B.	The loss on the sale may be carried forward to offset against related passive gains in future years.
	C.	The "loss" on the "sale" is treated as rent paid by the lessee/purchaaser to the lessor/seller and is reported as rental income to the lessor, and deductible rent expense to the lessee.
	D.	None of the above.

Solutions

Expert Solution

The Answer to above is B. As per Accounting standard Leases, incase of Sale and Leaseback transaction, if the transaction results in loss or profit then the resulting profit is not to be recognised immediately and amortised over the useful life of the asset and the same is offset against any future Depreciation or Income. Hence it is a deductible loss for future profits as per tax purposes.

ekkarill92 answered 2 years ago

Next > < Previous

Related Solutions

Estate Finance Family Tax Plan Question Assume for the purposes of this question that the UPAIA...

Estate Finance Family Tax Plan Question Assume for the purposes of this question that the UPAIA dictates the calculation of fiduciary accounting income. 1. In 2001, Larry creates a trust with Tenleytown Trust Company as trustee. The trustee must distribute income to Susie, Jeff and Leon (the trust does not provide for distributions of principal). In 2002, the trust has $50,000 of interest from corporate bonds, $50,000 of interest from tax-exempt municipal bonds and $50,000 of dividends. The trust also...

For each question below, assume that for each transaction, merchants are charged a variable rate +...

For each question below, assume that for each transaction, merchants are charged a variable rate + a per transaction fee (i.e. X% + $y per transaction)✱ Got it! In the month of June a merchant sold $100,000 from 5,400 transactions. If the gateway charges $0.30 per transaction, and their total fees were $4,370, what is the merchant's variable rate?✱ Use the variable rate you calculated in the last question. If a merchant sold $106,018.52 and paid $4633.01 in fees, how...

Question 4) Assume an economy that can be described by the following Table 1. Table 1...

Question 4) Assume an economy that can be described by the following Table 1. Table 1 Year Potential GDP Real GDP Price Level 1 $1 020 billion $1 020 billion 100 2 $1 080 billion $1 060 billion 103 Draw a dynamic aggregate demand and aggregate supply diagram to illustrate the state of the economy in Year 1. How can we characterize this position in Year 1? Answer: this position can be characterized Assume in Year 2 that no policy...

Discuss the reasons M&A are described as a cost effective method for expansion purposes in the...

Discuss the reasons M&A are described as a cost effective method for expansion purposes in the business of corporations. Use an example for a successful M&A in Zambia as a point of reference

For each transaction described below, write the name of the account that would be debited and...

For each transaction described below, write the name of the account that would be debited and the name of the account that would be credited when recording the transaction. No dollar amounts or explanations are required. Transaction To Record the Transaction in a Journal Entry, Name the Accounts that you would debit and credit Account to DEBIT Account to CREDIT Company purchased inventory on account Company sold/provided services for cash Company recorded depreciation on equipment for the period Company paid...

For each transaction described below, write the name of the account that would be debited and...

For each transaction described below, write the name of the account that would be debited and the name of the account that would be credited when recording the transaction. Company purchased inventory on account Company sold/provided services for cash Company recorded depreciation on equipment for the period Company paid NEXT YEAR’s insurance premium Company paid vendor for a prior purchase on account Company paid utility bill Company received cash deposit from customer for work to be performed in the future...

Siyeza Traders is an enterprise that sell motor vehicles in the ordinary course of business at...

Siyeza Traders is an enterprise that sell motor vehicles in the ordinary course of business at a mark-up of 45% on cost. During the current financial period, Siyeza Traders sold eight motor vehicles for a cash price of R80 000 each (15% VAT inclusive). Round your answer off to the nearest Rand. 3. Which of the following statement is correct? (1) VAT on cash sales will be debited to the VAT output account. (2) VAT on cash sales will be...

Transaction costs In late December you decide, for tax purposes, to sell a losing position that...

Transaction costs In late December you decide, for tax purposes, to sell a losing position that you hold in Twitter, which is listed on the NYSE, so that you can capture the loss and use it to offset some capital gains, thus reducing your taxes for the current year. However, since you still believe that Twitter is a good long-term investment, you wish to buy back your position in February the following year. To get this done you call your...

Question 5: Transaction analysis and recording &nbsp

Question 5: Transaction analysis and recording Transactions for Melbourne Consultants Ltd for the month of Jan 2020 are presented below: Jan 2. Shareholders invested $180,000 cash in exchange for shares in the business. Jan 2. Paid office rent of $4,800 for the month Jan 3. Purchased vehicle costing $22,000 for cash. Jan 6. Purchased equipment costing $10,000. $7,000 was paid in cash and the remainder on credit. Jan 14. Purchased office supplies on account for $325. Jan 15. Paid $2,500...

this is a International Finance Course Analyze tax treaties and purposes. Your response should be at...

***this is a International Finance Course*** Analyze tax treaties and purposes. Your response should be at least 200 words in length.

Subjects