Bearing in mind that a capital
lease is akin to an installment
purchase agreement, the lessee receives the asset to use at the
time of entering into the agreement and takes title
to it at the end of
the lease term. Presumably the person who is acquiring the capital lease is reimbursing the current lessee
for all or part of the
payments it has already made.
Probably only a portion because the asset that will be acquired is now used,
not new like when the original lease originated (I can't imagine
that the asset
has appreciated in value,
so why would
there be a premium paid to
step into the capital lease?). Since the amount being
paid to the current lessee only
represents the portion
of the value
of the asset that the current
lessee has already paid for, it doesn't represent the full value of the asset,
so I would say that the value
would be the current
full fair market
value (reflecting depreciation because it is used)
of the underlying asset.
Sent: Wednesday, March 13, 201311:15 AM
To: Verne, B. Michael
Subject: Question re: capitalleases/installment sales
I understandthat ordinarily enteringinto a lease is not the acquisition of an asset. Iunderstand that enteringinto a lease can be consideredthe acquisition of the leased asset where the lease is a capital lease or installment sale that will exhaust the useful life of the asset.I also understand that the transferof an existing lease is always the acquisitionof an asset (the rights in the lease)but that the value is limited to the premium paid by the buyer over the lease payments it will assume. Does this lease valuation rule govern the transfer of an existingcapital lease? Or would the value of a capitallease instead be determined under 801.10(b) -the FMV of the underlying asset,consistent with the exception that treatsentering into capital leases as asset acquisitions?
I couldn't find an ABA letter on point, but this must have been addressed before.