True Lease / Tax Lease
A True Lease is a contract in which one party (the “Lessor”) gives another party (the “Lessee”) the exclusive right to use and possess its property or equipment for a specified period. The Lessee is required to make monthly rental payments to the Lessor.
At the end of the lease term, the Lessee can return the equipment, release the equipment, or purchase the equipment. For federal tax purposes, the IRS usually considers the Lessor to be the owner of the leased property and is permitted to take the related tax benefits (e.g., depreciation deductions on the leased property).