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 MACRS depreciation.
D)buy the equipment with cash and depreciate it using MACRS.
E)buy the equipment and depreciate it straight-line over the life of the asset.

Question

Quizplus · Accepted Answer

If a firm does not expect to owe taxes for a few years, it would not benefit from the tax deductions associated with depreciation. Leasing the equipment with the lessor retaining the tax ownership allows the firm to avoid the upfront cost of purchasing the equipment and lets the lessor, who can utilize the tax benefits, own the asset.

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