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How a Lessor of Cows Can Ensure a 'True Lease'

BY John B. Spitzer
August 02, 2014

Most lawyers in the equipment financing business in urban areas have never handled a deal involving animals, such as livestock. So this article is dedicated to those equipment leasing specialists ' and their attorneys ' who represent dairy producers, ranchers, or those who plan to retire to a farm or dude ranch.

Commentators have pointed out the advantages of cattle leasing for both owners and farm operators. See http://bit.ly/1rl2iqm (last visited July 18, 2014). For example, the lessor and the lessee of dairy cows may find it mutually advantageous to agree to transfer cows to the lessee's farm so that the lessee can make best use of existing assets, such as livestock buildings and pastures.

Lessors of cattle also point out the tax benefits of leasing. And in the 1980s, tax shelters involving cattle were common. At that time, the tax benefits available in these deals included the investment tax credit, depreciation deductions, the deductibility of cattle maintenance expenses, and the deduction of interest expense paid pursuant to promissory notes used to finance the cattle lease.

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