Hello Scott. You’re correct. An ‘Operating Lease’ term is by definition short compared to the useful life of the equipment. To achieve any operating lease, the lender must assume the risk that the equipment will be worth an imputed $amount large enough to not lose money at the end of the lease term. One solution could be shorten the term from 5 years down to 3 years so the equipment retains more value at end of lease term – but equipment subject to rapid technical obsolescence is never a good candidate for an Operating Lease structure. In those cases, a “First Amendment” structure that requires the Lessee to either release the equipment or buy it for the stated value is the only method to achieve Operating Lease status for the initial lease term. Thanks. Fletch

Great question.

Businesses with a fiscal year-end that begins in 2011 can take advantage of the higher Section 179 limit of $500,000 all the way through their fiscal year-end in 2012.

However, businesses with a fiscal year-end that begins in 2011 can not take Bonus Depreciation for qualifying assets placed in service after December 31, 2011.

If you plan to take advantage of the larger first-year deductions by making significant capital expenditures in 2011 or 2012, I recommend asking your tax advisor to compute your actual deduction — especially if you operate on a fiscal tax year, where the Section 179 limits apply to a different time frame than Bonus Depreciation.