If a ﬁrm does not expect to owe taxes for a few years and needs some equipment, the ﬁrm should:
A) Lease the equipment and retain the tax beneﬁts.
B) Lease the equipment with the lessor retaining the tax ownership of the asset.
C) Borrow the money to buy the asset and then depreciate it using CCA depreciation.
D) Buy the equipment with cash and depreciate it using CCA.
E) Buy the equipment and depreciate it straight-line over the life of the asset.

Question

Quizplus · Accepted Answer

Leasing the equipment with the lessor retaining tax ownership allows the firm to avoid tax benefits it cannot use due to its non-taxable status, while still acquiring the equipment it needs.

If a ﬁRm Does Not Expect to Owe Taxes for a Few