Which One of the Following Correctly States One of the Conditions

question 36

Multiple Choice

Which one of the following correctly states one of the conditions established by the IRS for a lease to be considered valid for tax purposes?

• A)The lease should have high payments at the beginning of the lease period and low payments at the end of the lease period.
• B)Any renewal option should be based on a value which is less than the fair market value of the asset at the time of renewal.
• C)The term of the lease must be less than 80 percent of the economic life of the asset.
• D)The lessee should have the option to purchase the asset at a discounted price at the end of the lease term.
• E)The lessor must have a reasonable expectation of earning an aftertax profit.

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Definitions:

Ponzi Scheme

An investment fraud that pays existing investors with funds collected from new investors, promising high rates of return with little risk.

Bernie Madoff

A financier who orchestrated one of the largest Ponzi schemes in history, defrauding thousands of investors.

American Economy

The economic system of the United States characterized by free-market capitalism, a high level of technological innovation, and a significant global trade presence.

Lehman Brothers

An American global financial services firm that filed for bankruptcy in 2008, marking the largest bankruptcy filing in U.S. history and significantly contributing to the global financial crisis.