In a true lease, which party retains depreciation?

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Multiple Choice

In a true lease, which party retains depreciation?

Explanation:
In a true lease, the depreciation tax benefits stay with the asset’s owner, since the lessor remains the legal owner throughout the term. The lessee gets the right to use the asset in exchange for rent, but does not own it for tax purposes, so they don’t claim depreciation. The owner’s depreciation deduction reduces their taxable income, which is why depreciation is retained by the lessor. If it were a finance (capital) lease, the lessee would depreciate the asset as if they owned it.

In a true lease, the depreciation tax benefits stay with the asset’s owner, since the lessor remains the legal owner throughout the term. The lessee gets the right to use the asset in exchange for rent, but does not own it for tax purposes, so they don’t claim depreciation. The owner’s depreciation deduction reduces their taxable income, which is why depreciation is retained by the lessor. If it were a finance (capital) lease, the lessee would depreciate the asset as if they owned it.

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