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If a lease purchase option conveys an improvident bargain upon the lessee, the lessee may be subject to upon the sale of the

Please explain which option is correct. Thank you

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Answer #1

If a lease purchase option conveys an improvident bargain upon the lessee, the lessee may be subject to CCA RECAPTURE upon the sale of the contract as CCA recapture is the gain upon sale of the property that is calculated by deducting COST CAPITAL ALLOWANCE(CCA) by lower of original cost or proceeds of sale.

SO, Upon sale of asset, it will be subject to CCA Recapture as the lease with purchase option is conveying an improvident bargain upon the lessee.

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