A nonprofit organization, which runs a baseball league for children, purchases land, lighting equipment, stadium seating, and dugouts. They also purchase a stand-alone building for concessions sales and all of the equipment to operate the concessions. Because of the nonprofit paying little or no taxes, they sell everything they purchased for the baseball league to a profitable organization in a higher tax bracket. The nonprofit leases everything back from the profitable organization. What best describes this type of lease?

Question

Quizplus · Accepted Answer

A sales-type lease is a lease in which the lessor sells the asset to the lessee and the lessee leases the asset back to the lessor. This type of lease is often used by nonprofit organizations because it allows them to sell the asset and generate a profit, while still being able to use the asset.

A Nonprofit Organization, Which Runs a Baseball League for Children