1. What are the primary differences between operating leases and financial leases?
2. How does a leveraged lease differ from a nonleveraged financial lease? What type of firm or organization is most likely to take advantage of the leveraged lease financing option? What type of individual or financial institution is most likely to act as the lessor in a leveraged lease?
3. From a tax perspective, what primary requirements in a lease transaction must be met in order for the IRS to consider the transaction a genuine lease? Why is a favorable IRS ruling regarding the tax status of a lease important to both the lessor and the lessee?
4. One advantage that has often been claimed of lease financing is that it creates "off-balance sheet" financing. Evaluate this benefit in light of FASB Standard No. 13.