Practice Test Geeks(CLP) Certified Leasing Professional Practice Test
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Lease Law, Tax, and Accounting Flashcards

7 cards from real CLP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Lease Law, Tax, and Accounting flashcards as text

  1. Under the Economic Recovery Tax Act provisions, the Modified Accelerated Cost Recovery System (MACRS) classifies most leased business equipment (5-year property) using which depreciation method?

    Answer: 200% declining balance switching to straight-line

    5-year MACRS property uses the 200% declining balance method switching to straight-line when that method yields a larger deduction.

  2. A sale-leaseback transaction where the seller-lessee retains substantially all the risks and rewards of ownership would be accounted for as:

    Answer: A failed sale and financing arrangement

    When the seller-lessee retains substantially all risks and rewards, the transaction fails sale-leaseback criteria and is accounted for as a financing arrangement rather than a sale.

  3. Under the Statute of Frauds, a lease agreement for personal property must typically be in writing if the total lease payments exceed:

    Answer: $5,000 (UCC Article 2A threshold)

    UCC Article 2A requires a written lease agreement when total lease payments are $1,000 or more; however, many states set the Statute of Frauds threshold at $5,000 for personal property leases.

  4. Section 467 of the Internal Revenue Code addresses which specific leasing tax issue?

    Answer: Deferred rent arrangements and prepaid rent accrual mismatches

    IRC Section 467 governs leases with deferred or prepaid rent, requiring parties to accrue rent income and deductions based on an accrual method even if payments are uneven.

  5. Which of the following is a characteristic of a 'leveraged lease' from the lessor's perspective?

    Answer: The lessor funds only 20-40% of the asset cost and borrows the rest on a non-recourse basis

    In a leveraged lease, the lessor (equity participant) typically funds 20-40% of the asset cost while non-recourse debt from lenders funds the remainder, magnifying the lessor's tax benefits.

  6. In equipment leasing, the 'implicit rate' of a lease is best described as:

    Answer: The rate that causes the present value of lease payments plus residual value to equal the asset's fair value

    The implicit rate is the rate that discounts the sum of all lease payments plus any unguaranteed residual value to equal the fair value of the underlying asset at lease commencement.

  7. A lessee wishes to sublease equipment without the lessor's consent. Under UCC Article 2A, the lessee's right to sublease is:

    Answer: Freely permitted unless the lease explicitly prohibits it

    Under UCC 2A-303, a lessee generally may sublease the goods unless the lease contract explicitly prohibits or restricts such transfer.