Below are three situations for a leasing business: (a) A lease of asset P was granted on
Question:
Below are three situations for a leasing business:
(a) A lease of asset P was granted on 1 January 2020 for 60 months with rental amount of RM15,000 per month throughout the lease term. The asset was purchased from the lessee for RM600,000. The lessee, who owned the asset for two years but was not eligible to claim capital allowances, has no right to reacquire the asset. The lease rentals received for the year of assessment 2020 amounting to RM90,000.
(b) A lease of asset Q was granted on 1 July 2019 for 72 months with rentals of RM900 per month. The asset was installed in the lessee’s premise and cannot be used by any other person without altering or dismantling it. The lease rentals for year of assessment 2020 amounting RM10,800 of which RM8,340 relates to the interest portion.
(c) A lease of asset R is a result from a sale and lease back arrangement. The asset was previously used by the lessee who suffered a balancing charge on the sale of the asset to the lessor.
For each of the situation above, determine:
(a) whether the asset should be treated as lease asset or deemed sale asset, and
(b) the tax entitlement of capital allowance for the lease asset (eg, lessor or lessee)
Financial Reporting and Analysis
ISBN: 978-0078025679
6th edition
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon