Deduct the lease payments for income tax purposes

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Reference no: EM131875323

Zuzu Inc. plans to acquire a capital asset worth US$50,000. The asset is depreciable over 5 years on a straight-line basis, after which it will have no salvage value. Zuzu arranges for the asset to be leased for a lease rental of US$25,000 per year for two years after which it buys it for US$0.50. Can Zuzu Inc. deduct the lease payments for income tax purposes? Why? Why not? ?

Reference no: EM131875323

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