Indiana Administrative Code
Title 50 - DEPARTMENT OF LOCAL GOVERNMENT FINANCE
Article 4.2 - ASSESSMENT OF TANGIBLE PERSONAL PROPERTY
Rule 8 - Valuation of Leased Personal Property
Section 8-2 - "Capital and operating leases" defined
Universal Citation: 50 IN Admin Code 8-2
Current through September 18, 2024
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-31
Sec. 2.
(a) Types of leases. Generally, agreements which convey the right to use property for a stated period of time are termed leases and are usually classified as either capital leases or operating leases.
(b) "Capital leases" includes sales-type leases, direct financing leases, and leveraged leases. These leases must meet one (1) or more of the following conditions to be so classified and are or should be capitalized by the lessee for federal income tax purposes:
(1) Ownership of the property is transferred
to the lessee at or before the end of the lease term.
(2) The lease permits the lessee to purchase
the property or renew the lease at a price or rental which is substantially
less than the estimated market value or fair rental of the leased property at
the time the option to purchase or renew the lease is exercised.
(3) The lease term is equal to seventy-five
percent (75%) or more of the estimated economic life of the leased
property.
(4) The present value of
the minimum lease payments equals or exceeds ninety percent (90%) of the fair
market value of the leased property at the inception of the lease.
(c) "Operating leases" includes all other leases.
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