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Dear Sir
For option 2, it says it is finance lease but it calculated tax savings as 30% of annual rent and maintenance. I thought for finance lease only the interest component of the rental and depreciation are tax deductible?
Thanks.
With regard to the maintenance, then if Leaminger pays the maintenance the the payments are tax allowable (regardless of whether it is bought or leased and regardless of the type of lease).
The question specifically says that for purchasing and for the finance lease option Leaminger is paying maintenance, and so the answer has the tax saving on the maintenance.With regard to tax allowable depreciation, this only applies if the purchase the machine, not if they lease it.
Therefore the answer has not included TAD in the calculations for either the finance lease option or the operating lease option.
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