What is a Bargain Purchase Option?
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A
A method of accounting for transactions in which the seller-lessee records the sale , removes the property and related liabilities from its balance sheet, recognizes gain or loss from the sale and classifies the leaseback in accordance with proper lease accounting
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B
1.) Created by Job Creation and Worker Assistance Act of 2002
2.) Provides beneficial depreciation acceleration for lessors.
3.) 30% - 100% upfront depreciation in year of purchase followed by MACRS (vary over years)
4.) only available on NEW equipment
5.) 50% extended through 2019
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C
The estimated residual value of the leased property exclusive of any portion guaranteed by the lessee or by a third party unrelated to the lessor. If the guarantor is related to the lessor, the residual value is considered unguaranteed
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D
a provision allowing lessee, at his option, to purchase the property for a price sufficiently lower than the expected fair market value of the property at the date the option becomes exercisable. It is reasonably assured the purchase option will be exercised.