Which of the Following Statements Regarding Leases and Taxes Is

question 39

Multiple Choice

Which of the following statements regarding leases and taxes is false?

• A) In a non-tax lease, the lessee can deduct the interest portion of the lease payments as an interest expense.
• B) In a true tax lease, the lease payments are treated as revenue for the lessor.
• C) In a true tax lease, the lessee receives the depreciation deductions associated with the ownership of the asset.
• D) The IRS separates leases into two broad categories: true tax leases and non-tax leases.

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Definitions:

Diminishing Returns

A principle in economics indicating that adding more of one factor of production, while holding others constant, will at some point yield lower incremental per-unit returns.

Constant Costs

Costs that remain the same in total, regardless of changes in the volume of goods or services produced.

Average Variable Cost

The total variable costs of production divided by the quantity of output produced; it shows the variable cost per unit.

Average Fixed Cost

The fixed costs of production (costs that do not change with the level of output) divided by the quantity of output produced, decreases as production increases.