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Abstract
Different US federal income tax considerations apply to cross-border leases, depending on whether the lease transaction is an inbound or an outbound transaction, and whether the transaction in intended to be a true lease or a finance lease for US federal income tax purposes. This distinction between a true lease and a finance lease for US federal tax purposes is critical. The status of the lease will determine whether a sale-leaseback transaction involves a taxable sale or a non-taxable borrowing, and whether the lessor or the lessee is the tax owner of the asset entitled to depreciation or cost recovery deductions with respect to the leased asset. An in-bound cross-border lease may take the form of a true lease or a finance lease for US federal income tax purposes. Unfortunately, the US federal income tax laws often do not favor outbound cross-border lease transactions.