CLFP EXAM - Classification &
Terminology in Leasing Exam
Questions and Answers 100% Pass
Helps avoid tax abuse by defining what is not a lease for tax purposes. -
CORRECT ANSWER-What is significant about IRS Revenue Ruling 55-540?
Per IRS Revenue Ruling 55-540, what are the rules that if present prevent a
transaction from being a lease for tax purposes? - CORRECT ANSWER-1). Any
portion of the periodic payment is equity,
2.) lessee automatically acquires title upon making scheduled payments
3.) the total amount, which a lessee is required to be paid is an inordinately large
portion of the total sum to buy the equipment,
4.) Nominal purchase option
5.) some portion of the payment is designated interest
What are the tax benefits of a lease for the LESSOR? - CORRECT ANSWER-1.)
all rental streams would be taken into income,
2.) tax credits
, 3.) Allowable depreciations
What are the tax benefits of a lease for the LESSEE? - CORRECT ANSWER-all
rental payments can be treated as operating expenses and be not subject to federal
tax
What is IRS Revenue Procedure 75-21? - CORRECT ANSWER-Created in 1975,
it was designed to fix the shortcomings of IRS Revenue Ruling 55-540 which tried
to defined a contract of sale but did not did not include the attributes of a lease.
Per IRS Revenue Procedure 75-21, and later changed by Revenue Procedure 2001-
28, what are the attributes of a lease "for advanced ruling purposes only"? -
CORRECT ANSWER-1.) Risk - lessor must contain unconditional risk during
term;
2.) Right to Buy - Lessee may not have a right to buy at less than FMV,
3.) Investment: The lessee may not invest in the property;
4.) Loans: The lessee may not lend money to the lessor to buy the property;
5.) Profit: The lessor must show it is making a profit apart from the tax deduction
What may a transaction be labeled if it does not qualify for as a lease per Revenue
Procedure 2001 -28? - CORRECT ANSWER-Financing, conditional sales
COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED
Terminology in Leasing Exam
Questions and Answers 100% Pass
Helps avoid tax abuse by defining what is not a lease for tax purposes. -
CORRECT ANSWER-What is significant about IRS Revenue Ruling 55-540?
Per IRS Revenue Ruling 55-540, what are the rules that if present prevent a
transaction from being a lease for tax purposes? - CORRECT ANSWER-1). Any
portion of the periodic payment is equity,
2.) lessee automatically acquires title upon making scheduled payments
3.) the total amount, which a lessee is required to be paid is an inordinately large
portion of the total sum to buy the equipment,
4.) Nominal purchase option
5.) some portion of the payment is designated interest
What are the tax benefits of a lease for the LESSOR? - CORRECT ANSWER-1.)
all rental streams would be taken into income,
2.) tax credits
, 3.) Allowable depreciations
What are the tax benefits of a lease for the LESSEE? - CORRECT ANSWER-all
rental payments can be treated as operating expenses and be not subject to federal
tax
What is IRS Revenue Procedure 75-21? - CORRECT ANSWER-Created in 1975,
it was designed to fix the shortcomings of IRS Revenue Ruling 55-540 which tried
to defined a contract of sale but did not did not include the attributes of a lease.
Per IRS Revenue Procedure 75-21, and later changed by Revenue Procedure 2001-
28, what are the attributes of a lease "for advanced ruling purposes only"? -
CORRECT ANSWER-1.) Risk - lessor must contain unconditional risk during
term;
2.) Right to Buy - Lessee may not have a right to buy at less than FMV,
3.) Investment: The lessee may not invest in the property;
4.) Loans: The lessee may not lend money to the lessor to buy the property;
5.) Profit: The lessor must show it is making a profit apart from the tax deduction
What may a transaction be labeled if it does not qualify for as a lease per Revenue
Procedure 2001 -28? - CORRECT ANSWER-Financing, conditional sales
COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED
