CLFP EXAMINATION EVALUATION TEST
PAPER INCLUDING COMPLETE PRACTICE
QUESTIONS GRADED A PLUS
◉ Railroads. Answer: First to spread leasing through the US
◉ Equipment Lease. Answer: use and possession, but not title to
tangible property is transferred for consideration
◉ 2010 B.C.. Answer: Oldest record, in the Sumerian City of Ur.
Used clay tablets for documenting leases for agricultural tools, land
and water rights, and oxen and other animals
◉ The Code of Hammurabi. Answer: 1750 B.C. King Hammurabi
acknowledged leasing of personal property in his code of laws. First
Record of Leasing Law.
◉ Ship Charters. Answer: Early example of a True Lease.
Phoenicians were shipping and trading experts to obtain a ship and
crew. Charters covered the economic life of the ship and required the
lessee to assume the benefits and obligations of ownership.
◉ Statute of Whales. Answer: - 1284 A.D. English Common Law.
- Used in England to deal directly with leasing of personal property.
,- Further clarified in 1571 to define who actually owned the leased
property
◉ Industrial Revolution - The Railroad Industry. Answer: - In the UK
and US, RR companies could afford the track
- Financed the locomotives and railcars from private investors
- Done through equipment trusts
- Most well known: The Philadelphia Plan
◉ Independent Leasing Companies (early 1900's). Answer: - Formed
to provide vendor financing for Manufacturers
- Benefit of leasing to move product and gave rise to early captives
◉ Start of WWII. Answer: The government used cost-plus contracts
making leasing attractive again post-depression
◉ Cost-Plus Contract. Answer: Agreement typically used in the
construction industry by a client to reimburse a company for building
expenses stated in a contract, plus a dollar amount of profit over and
above expenses, usually stated as a percentage of the contract's full
price.
◉ Shift to Modern Leasing (1950's). Answer: - Economic slump post
WWII
- Government tried stimulating the economy (Section 167 of the IRC)
, ◉ Section 167 of the Internal Revenue Code. Answer: - 1953
- Gave owner/lessor ability to take ordinary payments into income
associated with a lease and accelerate depreciation
- Designed to encourage capital spending
◉ What led to modern day leasing?. Answer: - Governmental efforts
to stimulate the economy
- The Introduction of Accelerated Depreciation
◉ IRS Revenue Ruling 55-540. Answer: - Defines what is NOT a true
lease for tax purposes
- 6 criteria - if any aren't met, the IRS determines the lease to be a
CSC and tax benefits go to the lessee
◉ IRS Revenue Ruling 55-540 Purpose. Answer: - The IRS Revenue
Ruling 55-540 defines a true lease for TAX purposes.
- Defines what is not a true lease for TAX purposes
◉ IRS Revenue Ruling 55-540 (PAINEE). Answer: - P (Payments >
Rental)
- A (Automatic Title)
- I (Interest)
- N (Nominal PO)
- E (Equity)
- E (Excessive Payments)
PAPER INCLUDING COMPLETE PRACTICE
QUESTIONS GRADED A PLUS
◉ Railroads. Answer: First to spread leasing through the US
◉ Equipment Lease. Answer: use and possession, but not title to
tangible property is transferred for consideration
◉ 2010 B.C.. Answer: Oldest record, in the Sumerian City of Ur.
Used clay tablets for documenting leases for agricultural tools, land
and water rights, and oxen and other animals
◉ The Code of Hammurabi. Answer: 1750 B.C. King Hammurabi
acknowledged leasing of personal property in his code of laws. First
Record of Leasing Law.
◉ Ship Charters. Answer: Early example of a True Lease.
Phoenicians were shipping and trading experts to obtain a ship and
crew. Charters covered the economic life of the ship and required the
lessee to assume the benefits and obligations of ownership.
◉ Statute of Whales. Answer: - 1284 A.D. English Common Law.
- Used in England to deal directly with leasing of personal property.
,- Further clarified in 1571 to define who actually owned the leased
property
◉ Industrial Revolution - The Railroad Industry. Answer: - In the UK
and US, RR companies could afford the track
- Financed the locomotives and railcars from private investors
- Done through equipment trusts
- Most well known: The Philadelphia Plan
◉ Independent Leasing Companies (early 1900's). Answer: - Formed
to provide vendor financing for Manufacturers
- Benefit of leasing to move product and gave rise to early captives
◉ Start of WWII. Answer: The government used cost-plus contracts
making leasing attractive again post-depression
◉ Cost-Plus Contract. Answer: Agreement typically used in the
construction industry by a client to reimburse a company for building
expenses stated in a contract, plus a dollar amount of profit over and
above expenses, usually stated as a percentage of the contract's full
price.
◉ Shift to Modern Leasing (1950's). Answer: - Economic slump post
WWII
- Government tried stimulating the economy (Section 167 of the IRC)
, ◉ Section 167 of the Internal Revenue Code. Answer: - 1953
- Gave owner/lessor ability to take ordinary payments into income
associated with a lease and accelerate depreciation
- Designed to encourage capital spending
◉ What led to modern day leasing?. Answer: - Governmental efforts
to stimulate the economy
- The Introduction of Accelerated Depreciation
◉ IRS Revenue Ruling 55-540. Answer: - Defines what is NOT a true
lease for tax purposes
- 6 criteria - if any aren't met, the IRS determines the lease to be a
CSC and tax benefits go to the lessee
◉ IRS Revenue Ruling 55-540 Purpose. Answer: - The IRS Revenue
Ruling 55-540 defines a true lease for TAX purposes.
- Defines what is not a true lease for TAX purposes
◉ IRS Revenue Ruling 55-540 (PAINEE). Answer: - P (Payments >
Rental)
- A (Automatic Title)
- I (Interest)
- N (Nominal PO)
- E (Equity)
- E (Excessive Payments)
