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the lessor's rental income over the period of the lease exceeded
the sum of the lessor's depreciation and cost of financing its
purchase of the trucks.
A typical lease transaction takes place as follows:
Country-Fed first identifies the type of truck it wishes to
lease. The lessor then obtains the truck that Country-Fed has
identified. Often, Country-Fed negotiates with dealers regarding
the price for which the lessor could acquire the truck. After
identifying a truck which Country-Fed wishes to lease, Country-
Fed and the lessor execute a "New Vehicle Order"4 which is
subject to the terms of the master lease and contains the
3(...continued)
(ii) which clearly and legibly states that
the lessee has been advised that it will not be
treated as the owner of the property subject to
the agreement for Federal income tax purposes.
(D) Lessor must have no knowledge that
certification is false.--An agreement meets the
requirements of this subparagraph if the lessor
does not know that the certification described in
subparagraph (C)(i) is false.
As to each truck, Country-Fed executed the certification required
by sec. 7701(h)(2)(C) and used the truck in its business. There
is no evidence in the record regarding how the lessors financed
their acquisition of the trucks.
4 This is the term used by the McCullagh master lease. The
ARI master lease refers to this agreement as a "Motor Vehicle
Lease Agreement". The World Omni master lease refers to this
agreement as the "Leased Unit Quotation". Despite the difference
in terminology, the information contained in each document is
essentially the same.
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Last modified: May 25, 2011