Now is a great time to consider a sale-leaseback to free up the cash you have invested in your assets.
You’ve probably seen that car prices, both new and used, have risen due to shortages wrought by the pandemic. The same is true of equipment, regardless of which type of equipment you own. Shortages mean increased value, and more value means that you have more equity in your assets and more cash in your pocket if you decide a sale-leaseback is right for you.
Don’t Let the Tax Issues Hold You Back
Some may find themselves hesitant to pursue a sale-leaseback due to the perceived complexity of tax impacts and financial reporting requirements. We’ll help you navigate the muddy waters of sale-leaseback accounting and tax obligations.
The taxability of lease payments from a leaseback contract is dependent on whether state sales tax has already been paid on the asset. If you have already paid sales tax on the assets, then generally, the payments are not taxable.
Most US companies have or will soon adopt the new GAAP accounting rules for reporting leases. The new rules (ASC 842) have made the traditional accounting treatment of a sale-leaseback harder to achieve in some cases; however, depending on the asset and remaining useful life, LeasePlan may be able to help you achieve sale-leaseback treatment. It is important to note that even if you determine your unique situation is not eligible for sale-leaseback treatment for GAAP reporting purposes, LeasePlan can still buy your assets and lease them back to you under a financing lease arrangement.