LO5
A Leasing Paradox 22.6
• If the lessor and lessee have the same effective tax
rate, then leasing is a zero sum game
• When their tax rates differ, then leasing has benefits
for both parties
• The company in the higher tax bracket can benefit
from being a lessor, because they can use the
CCA tax shields
• The CCA tax shields are worth less to the lessee
because the lessee faces a lower tax rate or may
not have enough taxable income to absorb the
accelerated tax shields in the early years
22-0