CLFP PRACTICE EXAMINATION 2026
QUESTIONS WITH ANSWERS
GUARANTEED TO PASS.
◉ Dry Lease. Ans- A NET LEASE, traditionally for aircraft or marine
vessels, which requires the LESSEE TO PROCURE all personnel, fuel
and provisions necessary to operate the craft.
◉ Factoring. Ans- The assignment by a lessee of accounts receivable to
a lessor as collateral for a specified term and payment amount resulting
in liquidity to improve cash flow or make capital acquisitions.
◉ Finance Lease. Ans- A net lease, used to finance the use of property
for the majority of its useful life.
◉ Full Payout Lease. Ans- A lease in which the LESSOR RECOVERS,
through the lease payments, ALL COSTS incurred in the lease plus an
acceptable rate of return, WITHOUT reliance on the leased property's
RESIDUAL value.
◉ Installment Loan. Ans- Any loan, the terms of which call for regular
or irregular periodic payments, the sum of which will repay the debt and
interest.
,◉ Lease Intended as security. Ans- A transaction in which the form is a
lease, but the substance is a conditional sale contract or a loan with a
security agreement on the property.
◉ Leveraged Lease. Ans- Any lease involving, at minimum, a lessee, a
lessor and a funding source from whom the lessor borrows a significant
portion of the cost of equipment and holds an (minimum of 20%) equity
position.
◉ Master Lease. Ans- A document under which a lessee may add
additional schedules representing property later acquired, subject to the
same general terms and conditions.
◉ Money-over-Money Lease. Ans- A NON-TAX or CSC where the title
is intended to pass to the lessee at the end of the lease term.
◉ Municipal Lease. Ans- A lease to a municipality or government
agency, which isn't typically a true lease and from which the interest
earnings to the lessor are tax exempt.
◉ Net Lease. Ans- A lease in which all costs associated with use,
maintenance, insurance, and property taxes are PAID separately BY the
LESSEE (i.e. not included in rental payment).
,◉ Non-tax Lease. Ans- 1. Any lease in which the lessee is, or will
automatically become, the owner during or at lease end, and, is entitled
to all of the tax beneifts of ownership (e.g. money-over-money, CSC,
purchase money security agreement, or lease intended as security).
◉ Open-End Lease. Ans- A lease in which the LESSEE GUARANTEES
the future RESIDUAL value of the property to be realized by the lessor
at lease end.
◉ Operating Lease. Ans- Any lease that has the characteristics of a
usage agreement and also fails to meet any of the FASB 13 rules for a
capital lease.
◉ Purchase Money Security Interest. Ans- A security interest granted in
property to secure the payment of the purchase price of the property.
◉ Sale-Leaseback. Ans- A transaction under which the lessee sells the
property to be leased to the lessor and then leases back the same
property. (considered a lease in its form, but substantively more like a
loan or chattel mortgage).
◉ Sales Type Lease. Ans- A capital lease that GIVES rise to
manufacturer's or dealer's PROFIT to the lessor.
, ◉ Section 38 Property. Ans- Any asset on which depreciation may be
taken, as defined by the IRS.
◉ Section 179. Ans- IRS code allowing taxpayer to deduct certain types
of property as a direct expense against income rather than depreciating
the asset over its tax life.
◉ Service Lease (Gross or Maintenance Lease). Ans- A lease in which
the lessor provides such services as maintenance for the leased property.
The cost of services may be built into the payments or paid separately.
◉ Single Investor Lease. Ans- A lease under which the lessor is fully at
risk for all funds used to purchase the equipment and is a 2 party
transaction, lessor + lease.
◉ Term Loan. Ans- Any loan with a fixed maturity date.
◉ Trac Lease. Ans- A lease on automobiles, trucks or trailers which may
be a true lease for IRS, despite, that it contains a Terminal Rental
Adjustment Clause (TRAC) which guarantees the lessor the residual
value. The lessor must: (a) maintain a minimum at-risk position equal to
the borrowings used to fund the vehicle (b) Obtain a lessee certification
that the lessee will use the vehicle more than 50% for business.
QUESTIONS WITH ANSWERS
GUARANTEED TO PASS.
◉ Dry Lease. Ans- A NET LEASE, traditionally for aircraft or marine
vessels, which requires the LESSEE TO PROCURE all personnel, fuel
and provisions necessary to operate the craft.
◉ Factoring. Ans- The assignment by a lessee of accounts receivable to
a lessor as collateral for a specified term and payment amount resulting
in liquidity to improve cash flow or make capital acquisitions.
◉ Finance Lease. Ans- A net lease, used to finance the use of property
for the majority of its useful life.
◉ Full Payout Lease. Ans- A lease in which the LESSOR RECOVERS,
through the lease payments, ALL COSTS incurred in the lease plus an
acceptable rate of return, WITHOUT reliance on the leased property's
RESIDUAL value.
◉ Installment Loan. Ans- Any loan, the terms of which call for regular
or irregular periodic payments, the sum of which will repay the debt and
interest.
,◉ Lease Intended as security. Ans- A transaction in which the form is a
lease, but the substance is a conditional sale contract or a loan with a
security agreement on the property.
◉ Leveraged Lease. Ans- Any lease involving, at minimum, a lessee, a
lessor and a funding source from whom the lessor borrows a significant
portion of the cost of equipment and holds an (minimum of 20%) equity
position.
◉ Master Lease. Ans- A document under which a lessee may add
additional schedules representing property later acquired, subject to the
same general terms and conditions.
◉ Money-over-Money Lease. Ans- A NON-TAX or CSC where the title
is intended to pass to the lessee at the end of the lease term.
◉ Municipal Lease. Ans- A lease to a municipality or government
agency, which isn't typically a true lease and from which the interest
earnings to the lessor are tax exempt.
◉ Net Lease. Ans- A lease in which all costs associated with use,
maintenance, insurance, and property taxes are PAID separately BY the
LESSEE (i.e. not included in rental payment).
,◉ Non-tax Lease. Ans- 1. Any lease in which the lessee is, or will
automatically become, the owner during or at lease end, and, is entitled
to all of the tax beneifts of ownership (e.g. money-over-money, CSC,
purchase money security agreement, or lease intended as security).
◉ Open-End Lease. Ans- A lease in which the LESSEE GUARANTEES
the future RESIDUAL value of the property to be realized by the lessor
at lease end.
◉ Operating Lease. Ans- Any lease that has the characteristics of a
usage agreement and also fails to meet any of the FASB 13 rules for a
capital lease.
◉ Purchase Money Security Interest. Ans- A security interest granted in
property to secure the payment of the purchase price of the property.
◉ Sale-Leaseback. Ans- A transaction under which the lessee sells the
property to be leased to the lessor and then leases back the same
property. (considered a lease in its form, but substantively more like a
loan or chattel mortgage).
◉ Sales Type Lease. Ans- A capital lease that GIVES rise to
manufacturer's or dealer's PROFIT to the lessor.
, ◉ Section 38 Property. Ans- Any asset on which depreciation may be
taken, as defined by the IRS.
◉ Section 179. Ans- IRS code allowing taxpayer to deduct certain types
of property as a direct expense against income rather than depreciating
the asset over its tax life.
◉ Service Lease (Gross or Maintenance Lease). Ans- A lease in which
the lessor provides such services as maintenance for the leased property.
The cost of services may be built into the payments or paid separately.
◉ Single Investor Lease. Ans- A lease under which the lessor is fully at
risk for all funds used to purchase the equipment and is a 2 party
transaction, lessor + lease.
◉ Term Loan. Ans- Any loan with a fixed maturity date.
◉ Trac Lease. Ans- A lease on automobiles, trucks or trailers which may
be a true lease for IRS, despite, that it contains a Terminal Rental
Adjustment Clause (TRAC) which guarantees the lessor the residual
value. The lessor must: (a) maintain a minimum at-risk position equal to
the borrowings used to fund the vehicle (b) Obtain a lessee certification
that the lessee will use the vehicle more than 50% for business.
