|
U.S. Income Tax Law |
|
|||
|
Attorney at Law |
||||
|
|
||||
|
Innovative Like-Kind Exchange Structures Lessors may use like-kind exchanges (“LKEs”) to enhance tax deferrals in a number of ways. In the simplest strategy, instead of selling property coming off lease, a lessor may arrange to exchange it for other like-kind property, and thereby avoid gain. The U.S. Internal Revenue Service has facilitated this strategy for operating lessors who regularly purchase inventory, by promulgating simplified procedures for LKE programs. See Rev. Proc. 2000-39.
In June 2005, Mr. Cozart discussed a number of innovative LKE strategies at a panel sponsored by the Equipment Leasing Association in San Francisco. This included requiring the lessee to arrange an LKE as a condition of its exercising an option to acquire the property at the end of the lease term. In transactions where this structure is commercially viable, an operating lessor may be able to more confidently take the tax benefits of an end-of-term LKE into account in setting competitive lease rates. The structure may be particularly suitable for lessees who are able to arrange LKEs without assistance from the lessor. |
||||
|
||||
