Capital leasing arrangements are most likely to be mutually beneficial to lessor and lessee when the lessor is taxed at a higher rate and can issue debt at a lower rate than the lessee.

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When the lessor is taxed at a higher rate, they can claim more tax deductions on their depreciation expenses and thus reduce their tax liability. This allows them to offer lower lease rates to the lessee. Additionally, if the lessor can issue debt at a lower rate than the lessee, they can offer more favorable lease terms to the lessee. This results in a win-win situation for both parties.

Capital Leasing Arrangements Are Most Likely to Be Mutually Beneficial