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Property Tax Exemptions and Capital Leases

kimberly kelly's Profile

Two part question: 1) It's been a LONG time since I've had to deal with Capital vs. Operating Leases, but I have a colleague who owns property, is considering leasing it and is looking at different ways of structuring the lease. I have dealt with capital leases as the entity acquiring the property but not from the other side. How is the lease accounted for by the actual owner of the property? Does it differ depending on how the lessee would be accounting for it? 2) Other question is related to how my colleague can qualify for a welfare exemption on the property taxes related to the property. The owner of the property is a 501c(3) and is looking to lease the property to another 501c(3). The property is in Alameda County and the Assessor's office there has not been helpful. My experience has been that if the owner of the property is a non-profit, the exemption is automatic; but this is apparently not the case. We are looking for an expert who can have a brief conversation with the property owner about their options to eliminate the tax payment on the property.

Answers

Scott Lane
Title: CFO and CRO
Company: TPG Credit Management
(CFO and CRO, TPG Credit Management) |
To your first question the accounting rules for leases are a bit complex, particularly for the lessor. I am not an expert on this but will post the current GAAP rules in the resources section for you. Admittedly not a huge help but perhaps a starting point.
John Kogan
Title: CEO/CFO
Company: Proformative, Inc.
(CEO/CFO, Proformative, Inc.) |
Courtesy of Dan Sholem: THE property tax expert/advisor in Northern California is Tim Doss @ AdValorem Solutions www.advaloremsolutions.net ..... The firm has heavy duty experience with all Bay Area counties dealing with both personal & real property taxes. Definitely an advocate to have in your corner. Dan Sholem
Topic Expert
Barrett Peterson
Title: Senior Manager, Actg Stnds & Analysis
Company: TTX
(Senior Manager, Actg Stnds & Analysis, TTX) |

Leasing structures vary widely and depend partially on the asset and contract size. Be aware that special provisions apply to both parties of leases with variable payments, including downpayments - Section 467 contracts. These can be complex and failure to comply can result in disallowed treatgments as a tax shelter without substance.

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