Definitions for "True Lease"
Keywords:  lessor, lessee, irs, rental, revenue
contract that qualifies as a valid lease agreement under the Internal Revenue code.
A lease, also called a tax lease, in which, for IRS purposes, the lessor qualifies for the tax benefits of ownership and the lessee is allowed to claim the entire amount of the lease rental as a tax deduction.
A type of lease under which ownership of the equipment remains with the lessor. To qualify as a true lease for tax purposes, the Internal Revenue Service states that: 1) Title must remain with the lessor; 2) The rental payments must be competitive with industry rates, represent payment for use of the equipment and have a rate that does not vary appreciably with or without purchase option; 3) The option to purchase price must not be less than the fair market price at the lease's expiration date; 4) Equity cannot be allowed on rental payments. For tax purposes, the total monthly payments can be deducted.
An agreement in which an owner gives up possession of property for consideration and a definite term, and at the end of the term, the owner has the absolute right to retake, control, or convey the property.