Tax effect. Lease payments are expenses that can be written off against income immediately. Loans are depreciated over a longer period of time. One major advantage of leases over loans is the impact leases have on land use. When a firm leases land for its operations, it can not deduct the lease expense from income. Purchased land, on the other hand, can be deducted from tax obligations.

Question

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The first sentence is true, but the second sentence is incorrect. Lease payments can also be deducted from tax obligations, but they are treated differently than loan payments. Additionally, the last sentence is incorrect because purchased land cannot be deducted from tax obligations. Land is considered a capital asset and can only be depreciated over a longer period of time.

Tax Effect