Edvard Richards Case Scenario - Sale-and-lease-back

Hi there, working on the second item set “Edvard Richards Case Scenario.” Question 10 is about monetizing real estate, and which option of those provided gives the highest immediate amount after-tax. The sale and lease back answer includes an income deduction on rent (rent x income tax rate). The case does not explicitly say that there is an income deduction on rent. The CFAI textbook says that there is typically complete rental payment deductibility for tax purposes.

How are we supposed to treat tax deductions on this form of monetization if it’s not stated in the case how they are treated? And when the textbook says “complete rental payment” --would that refer to the entire rent amount or the rent amount x income tax rate? Thanks for any insight.

You should know from Levels I and II that rent is generally a deductible expense for businesses.

Go with that.

I think it states in the cfai text that rent is a deductible expense

accounting 101: rent is a business expense

I agree with you all, I just thought the CFAI text saying it is “typically” deductible left some room for uncertainty. Even you are saying “generally” which isn’t definitive. I guess I’ll just roll with it is deductible unless otherwise stated.

I suppose if my business was paying my personal rent (the house that I live iin) ths would not be tax deductible to my business. It would instead be a taxable benefit to me. So in theory, rent is generally deductible :slight_smile: