CLFP TERMS EXAM ACTUAL TEST QUESTIONS
AND SOLVED ANSWERS
◉ Master Lease.
Answer: 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.
Answer: A NON-TAX or CSC where the title is intended to pass to the
lessee at the end of the lease term.
◉ Municipal Lease.
Answer: 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.
Answer: 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.
,Answer: 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.
Answer: 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.
Answer: 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.
Answer: A security interest granted in property to secure the
payment of the purchase price of the property.
◉ Sale-Leaseback.
Answer: 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.
Answer: A capital lease that GIVES rise to manufacturer's or dealer's
PROFIT to the lessor.
◉ Section 38 Property.
Answer: Any asset on which depreciation may be taken, as defined
by the IRS.
◉ Section 179.
Answer: 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).
Answer: 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.
Answer: 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.
, Answer: Any loan with a fixed maturity date.
◉ Trac Lease.
Answer: 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.
◉ True Lease (Tax Lease).
Answer: A lease, which for tax purposes, fails to meet all of the tests
for a conditional sale contract under IRS ruling 55-540, therefore,
the lessor qualifies for the tax benefits of ownership and lessee to
claim the entire amount of the lease payment as a tax deduction.
◉ Wet Lease.
Answer: A GROSS LEASE, traditionally for aircraft or marine vessels
in which the lessor provides bundled services such as the payment
of property taxes, insurance, maintenance costs, all personnel, fuel,
and provisions to operate the craft.
◉ Ruling 55-540 (1955).
AND SOLVED ANSWERS
◉ Master Lease.
Answer: 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.
Answer: A NON-TAX or CSC where the title is intended to pass to the
lessee at the end of the lease term.
◉ Municipal Lease.
Answer: 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.
Answer: 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.
,Answer: 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.
Answer: 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.
Answer: 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.
Answer: A security interest granted in property to secure the
payment of the purchase price of the property.
◉ Sale-Leaseback.
Answer: 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.
Answer: A capital lease that GIVES rise to manufacturer's or dealer's
PROFIT to the lessor.
◉ Section 38 Property.
Answer: Any asset on which depreciation may be taken, as defined
by the IRS.
◉ Section 179.
Answer: 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).
Answer: 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.
Answer: 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.
, Answer: Any loan with a fixed maturity date.
◉ Trac Lease.
Answer: 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.
◉ True Lease (Tax Lease).
Answer: A lease, which for tax purposes, fails to meet all of the tests
for a conditional sale contract under IRS ruling 55-540, therefore,
the lessor qualifies for the tax benefits of ownership and lessee to
claim the entire amount of the lease payment as a tax deduction.
◉ Wet Lease.
Answer: A GROSS LEASE, traditionally for aircraft or marine vessels
in which the lessor provides bundled services such as the payment
of property taxes, insurance, maintenance costs, all personnel, fuel,
and provisions to operate the craft.
◉ Ruling 55-540 (1955).
