All’s fair…

It’s common for business owners to lease equipment and machinery assets they own to themselves under a related operating entity. (In business, this is commonly employed in regards to real estate, but it also happens frequently with machinery and equipment.)

In these situations, a value is assigned to the equipment being leased – and, as you can imagine, that value can have sizable implications on future tax responsibilities for both parties. Too often, unfortunately, business owners don’t work with experienced professionals like an M&E appraiser in these types of situations. And that can have profound impacts on their bottom line. 

That’s because an experienced M&E appraiser will help a business owner establish what’s called “fair rental value” for the equipment being leased, which can avoid future tax issues for them and the business. More broadly, M&E appraisers can determine fair leasing rates between related parties – including custom equipment manufacturers, for example, who want to offer lease purchase options to reduce their customers' cash outlay.

The bottom line? In situations like the one above, working with an M&E appraiser will go a long way in helping business owners avoid future tax issues and other potential headaches. Have questions about how this may relate to or impact your specific situation? Contact us today.