Capital leasing is mutually advantageous to lessor and lessee when
A) when the lessee only needs the asset for a fraction of its useful life.
B) when the lessee does not want to have additional debt on the balance sheet.
C) when the lessee has a higher taxrate than the lessor.
D) the lessor has a higher tax rate than the lessee.

Question

Quizplus · Accepted Answer

Capital leasing is mutually advantageous when the lessor has a higher tax rate than the lessee because the lessor can take advantage of tax deductions related to ownership such as depreciation, while the lessee benefits from using the asset without having to purchase it outright.

Capital Leasing Is Mutually Advantageous to Lessor and Lessee When