The Different Types of Leases Research Paper Example | Topics and Well Written Essays - 1500 words - 1

The Different Types of Leases - Research Paper Example This paper illustrates that in order to obtain business equipment and supplies that can shed its effects on the flow of money, one can rely on lease financing as the possible way to straight up capital. Recent surveys prompt that more than 80% of the business organizations in the United States rely on this alternative at minimum one of the equipment acquisitions. It is forecasted that almost 95% would lease in the future. Lease financing is often referred to as â€Å"lease†. It is a contractual agreement involving two parties the lessor and lessee. The lease can be defined as a legal document that must be reviewed by an experienced attorney. The company acts as the lessor grants the individual or group acting as the lessee leasing the product or equipment. The contract assigns the lessee to operate the equipment for some pre-specified time. In the period the lessee is required to make monthly payments to the lessor for providing the opportunity. The lease can be categorized in to the following: lease of finance and lease of operation, sale and leaseback along with direct lease, lease of single investor and leveraged lease, domestic lease and international lease. However, finance lease and operating lease are the most popular leases. A financial lease covers the entire life of the equipment to be leased. A sale and lease can be thought of as one type of financial lease. One can even think of combination lease. This type of lease combines aspects of the popular leases. The effects of the tax can be categorized in the following two ways. The first category is to determine the effects of each flow of cash on taxable income. Rents or another type of fees tend to increase the taxable income while expenditure has the opposite effect. The second category is to compute the amount of the tax to be paid and time when the payment is to be made. After the calculation of the taxable income, the rate of the tax is applied to arrive at the liability. The tax is generally paid in 4 installments. The fourth, sixth, ninth and the twelfth month is regarded as the months of payment for the particular year. The amount of the flows is referred as magnitude.