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Alternative Minimum Tax ("AMT" Or "Minimum Tax"). A separate tax calculation in which a taxpayer must pay the higher of its regular tax or amt liability. The corporate amt rate, although lower than the regular tax rate, is applied to a different, typically higher, taxable income than for regular taxes. This form of tax makes it more difficult to avoid paying "fair share" of tax through the use of certain regular tax benefits, which are known as "tax preference items" or "adjustment items".
Bargain Purchase Option. An option allowing the lessee to purchase the leased asset at the end of the lease term for a price that is fixed substantially below the expected "fair market value", such that, at the inception of the lease, purchase appears to be reasonably assured.
Bargain Renewal Option. A lease provision allowing the lessee to extend the lease for an additional term with payments substantially lower than the fair value of the asset, such that exercise of the option appears, at the inception of the lease, to be reasonably assured.
Call Option. Another term for a purchase or a renewal option, that is exercisable at the discretion of the lessee, not the lessor.
Capital Lease. Sometimes called financial lease or nontax lease. It is a lease that from the financial reporting standpoint has the characteristics of a purchase agreement, that meets at least one of the criteria outlined in paragraph 7 of FASB 13. A capital lease must be shown as an asset and a related obligation on the balance sheet of the lessee.
Certificate Of Delivery And Acceptance (D&A). A document signed by the lessee to confirm the leased asset has been delivered and is acceptable. In most cases, the lease term commences once this document has been signed.
Conditional Sales Contract. An agreement for the purchase of an asset in which the lessee is treated as the owner of the asset for federal income purposes, therefore entitled to the tax benefits of ownership, such as depreciation.
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