7670 Woodway Drive
Suite 200
Houston, TX 77063
Much like the Operating Lease with a fair market residual, the lessor is the owner of the equipment and receives all of the tax benefits of ownership. In the leasing industry a True Lease is sometime referred to as a Fair Market Value Lease.

A lease is NOT considered a True Tax Lease by the IRS if ANY of the following are true:

Any part of the lease payment is applied to an equity position in the asset leased.
The lessee will, by default, acquire ownership of the equipment upon payment of a specified amount of rentals (payments) they make during the term.
Over a short period of time the equipment is used and the total amount the lessee pays is an exceedingly large proportion relative to the total sum required to outright buy the equipment.
The agreed upon payments exceed the current fair rental value.
Any portion of the lease payments are specifically designated as interest.
At the time any purchase option may be exercised, the title to the equipment may be acquired for an exceedingly small purchase option price in relation to the actual value of the equipment. (i.e. $1.00, or guaranty 10% residual)