Attorney at Law         

Leasing Partnerships

Since the late 1980’s, Mr. Cozart has advised clients on the merits of using various leasing partnership structures to improve the tax and financial accounting treatment of leasing transactions. These structures have become increasingly promising as alternative structures (such as LILOs and lease-to-service contracts) have either been challenged by the IRS or have become less viable due to the enactment of I.R.C. section 470 in 2004.

Mr. Cozart’s expertise in leasing partnership transactions grew out of client work in the late 1980s and the publication of two articles in Taxes magazine (see Publications) dealing with disproportionate partnership allocations of income and deductions. In the early 1990’s, Mr. Cozart helped a client acquire interests in a number of containerships through a partnership using such allocations. Since the mid 1990’s, he has advised clients to take advantage of partnership structures in which the partnership leases its property to one of its partners. He discussed the tax issues raised by these structures in 545 T.M., Equipment Lease Characterization (1996, 2009). A number of transactions have since been closed that contain this structural element.

To implement disproportionate allocation structures, a multitude of complex tax rules, and uncertain computational requirements, must be applied in determining the basic parameters of the transactions, including rent and debt service, investment and cash flow shares and taxable income and loss allocations. Since 1995, Mr. Cozart has worked closely with leading software companies to develop mathematical models that have the ability to optimize investor yields and GAAP earnings. See Lease Modeling and P'ship Modeling.

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