Leases and taxes Leasing is a very lucrative source of financing for certain companies' needs, including corporations and small- to medium-sized businesses. This is because the Internal Revenue Service (IRS) allows the lessee to deduct the lease payments and the lessor can deduct interest payments on any debt used to finance the asset leased. A lease in which the lessee is the effective owner of the leased property, can depreciate the asset under lease for tax purposes and can deduct only the interest portion of the lease payment is called a tax-oriented lease Nicole is a lawyer at Leaseonic Corp. She is evaluating the company's current lease agreements. Nicole recently hired an intern, Michael, and assigned him the task of listing the provisions for tax guidelines related to lease contracts. Nicole needs to check and find mistakes in the provisions that Michael listed. Which of the following points in the document submitted by Michael are correct? Check all that apply. Leaseonic Corporation Provisions of the Tax Guidelines Check all that apply. The lease term can be extended to an unlimited term using extension and renewals at a fixed rental rate. The lease agreement can restrict the use of the equipment so that only its lessee or a related party can use the asset after the expiration of the term. Equipment with a 20-year life cannot be leased for more than 16 years. The lessee has the option of buying the equipment at the expiration of the lease contract at its fair market value. The equipment's residual value at the expiration of the lease should be at least one fifth of its value at the start of the lease. forfeiture upon If a lease purchase option conveys an improvident bargain upon the lessee, the lessee may be subject to the sale of the asset.