- 16 -
Once the TRAC is disregarded, the master leases contain
standard equipment lease provisions that do not preclude
treatment of the lease transactions as leases. See, e.g., Torres
v. Commissioner, 88 T.C. 702, 721 (1987) ("because net leases are
common in commercial settings, it is less relevant that * * *
[the lessor] was not responsible for the payment of property
taxes or that * * * [the lessor] bears less of a risk of loss or
damage to the property because the lessee is required to maintain
insurance on the property."); Gefen v. Commissioner, 87 T.C.
1471, 1493 (1986) ("we have long rejected any notion that a net
lease * * * shifts the burden of ownership from the lessor to the
lessee."); Northwest Acceptance Corp. v. Commissioner, 58 T.C.
836, 847-848 (1972) (finding that even a generous purchase option
is not fatal to lease determination), affd. per curiam 500 F.2d
1222 (9th Cir. 1974). Accordingly, in the instant case, we
conclude that the lease transactions should be treated as leases.
Finally, the form of a transaction, if imbued with tax-
independent considerations, has economic substance and will be
11(...continued)
result of the TRAC. Because Country-Fed was entitled to the
proceeds of the sale above any remaining base price plus the
costs to the lessor of arranging the sale, when Country-Fed
purchased the trucks, it was not required to pay the lessor
anything above the base price plus the costs to the lessor of
arranging the sale. Moreover, because the base price was
effectively reduced to zero at the end of the lease term,
Country-Fed would be required to pay only a nominal amount to
purchase the vehicle at the end of the lease term.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011