CLFP COMPREHENSIVE TEST SCRIPT
2026 QUESTIONS WITH SOLUTIONS 100%
CORRECT.
◍ Section 167 - 1950's. Answer- Allowed equipment owners to
accelerate depreciation and defer taxable income. The goal was to
encourage capital spending.
◍ ITC (Investment Tax Credit) - 1960's. Answer- Used to stimulate the
economy and capital expenditures, it provided a tax credit to purchasers
of equipment to offset their tax liability to the government. Initially set
at 7%, it became a give & take option with the government.
◍ Revenue Procedure 75-21 - 1970's (TAX LENS). Answer- Laid out
the 6 criteria the IRS would use for advanced rulings to determine if the
Lessor is the owner for tax purposes.
◍ FASB 13 - 1970's (ACCOUNTING LENS). Answer- Provided the
accounting definition of a lease.
Set forth 4 criteria to classify a lease as either: Capital Lease or
Operating Lease and how to treat each on the financial statements of
both the Lessor and Lessee.
, ◍ ERTA (Economic Recovery Act of 1981). Answer- Related to the tax
treatment of leases and methods of depreciation and Safe Harbor
Leasing. Resulted in the government losing tax revenues.
◍ TEFRA (Tax Equity and Fiscal Responsibility Act of 1982). Answer-
Passed to increase tax revenues lost under ERTA. It also repealed Safe
Harbor Leasing and replaced it with "finance leases".
◍ DRA (Deficit Reduction Act of 1984). Answer- A means of reducing
the deficit & raising tax revenues. It introduced the time value of money
as a method for lessors to adjust uneven rental streams for tax purposes.
TRAC Leases were recognized as true tax leases.
◍ Safe Harbor Leasing - 1980's. Answer- A method of transferring tax
benefits to an unrelated third party, providing tax shelters to investors. It
had a significant impact on leasing.
◍ ACRS (Accelerated Cost Recovery System) - 1980's. Answer-
Replaced the highly complex ADR depreciation system. This new
system had only 5 classes of assets, ranging from 3 to 15 year life spans
and specified the % of cost to be written off each year. Enabled the
owner/Lessor to fully depreciate an asset without having to estimate
useful life and salvage value.
◍ ADR (Asset Depreciation Ranges) - 1972. Answer- Created hundreds
of asset categories and prescribed useful lives for the depreciating assets.
2026 QUESTIONS WITH SOLUTIONS 100%
CORRECT.
◍ Section 167 - 1950's. Answer- Allowed equipment owners to
accelerate depreciation and defer taxable income. The goal was to
encourage capital spending.
◍ ITC (Investment Tax Credit) - 1960's. Answer- Used to stimulate the
economy and capital expenditures, it provided a tax credit to purchasers
of equipment to offset their tax liability to the government. Initially set
at 7%, it became a give & take option with the government.
◍ Revenue Procedure 75-21 - 1970's (TAX LENS). Answer- Laid out
the 6 criteria the IRS would use for advanced rulings to determine if the
Lessor is the owner for tax purposes.
◍ FASB 13 - 1970's (ACCOUNTING LENS). Answer- Provided the
accounting definition of a lease.
Set forth 4 criteria to classify a lease as either: Capital Lease or
Operating Lease and how to treat each on the financial statements of
both the Lessor and Lessee.
, ◍ ERTA (Economic Recovery Act of 1981). Answer- Related to the tax
treatment of leases and methods of depreciation and Safe Harbor
Leasing. Resulted in the government losing tax revenues.
◍ TEFRA (Tax Equity and Fiscal Responsibility Act of 1982). Answer-
Passed to increase tax revenues lost under ERTA. It also repealed Safe
Harbor Leasing and replaced it with "finance leases".
◍ DRA (Deficit Reduction Act of 1984). Answer- A means of reducing
the deficit & raising tax revenues. It introduced the time value of money
as a method for lessors to adjust uneven rental streams for tax purposes.
TRAC Leases were recognized as true tax leases.
◍ Safe Harbor Leasing - 1980's. Answer- A method of transferring tax
benefits to an unrelated third party, providing tax shelters to investors. It
had a significant impact on leasing.
◍ ACRS (Accelerated Cost Recovery System) - 1980's. Answer-
Replaced the highly complex ADR depreciation system. This new
system had only 5 classes of assets, ranging from 3 to 15 year life spans
and specified the % of cost to be written off each year. Enabled the
owner/Lessor to fully depreciate an asset without having to estimate
useful life and salvage value.
◍ ADR (Asset Depreciation Ranges) - 1972. Answer- Created hundreds
of asset categories and prescribed useful lives for the depreciating assets.
