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As will be shown below, the unusual U.S. treatment
of these income amounts creates an opportunity for an
“arbitrage” between the U.S. tax system and that of
another country (such as Belgium) which does not treat
the amounts as currently taxable income.
The essential elements of the transaction are as
follows:
1. Two Belgian individuals, with experience in all
aspects of the leasing business, purchase a portfolio of
U.S. computer equipment from Comdisco, Inc. (“Comdisco”).
The purchase is made through an entity that is treated as
a partnership for U.S. tax purposes (the “Partnership”).
The equipment is immediately leased back to Comdisco,
which in turn subleases the equipment to its customers,
the users of the equipment. Neither the Partnership nor
its partners are subject to U.S. tax.
2. Subsequently, the Partnership sells to a bank
the right to receive the rents payable by Comdisco under
the lease. The sale of the Comdisco rent stream is
without recourse to either the Partnership or to the
equipment. Accordingly, from a U.S. point of view, all
of the rental income from the Comdisco lease is deemed to
have been accelerated. Stated another way, the sale of
the rent stream removes or “strips” the rental income
from the leased equipment.
3. At a later date, but without any prior
commitment (formal or informal) to do so, a U.S. company
may acquire a 98% interest in the Partnership, utilizing
certain provisions of the U.S. tax code under which tax
attributes carry over to the new owner.
4. The U.S. company, as 98% partner, would be
entitled to depreciation with respect to 98% of the cost
of the equipment. No rental income would be reportable
by the U.S. company, that income having been accelerated
into the tax period prior to the U.S. company’s becoming
a partner.
5. The resulting U.S. tax savings from the
depreciation would be permanent tax savings, not mere
deferrals. They would be reflected in reported earnings.
The law firm of Baker & McKenzie provided Comdisco with legal
services related to the sale-leaseback transactions.
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Last modified: May 25, 2011