Taxable Income [R0301]

The Taxable Income report [R0301] provides year-to-date information on taxable income generated by the lease portfolio, to assist in the preparation of the lessor’s federal and state tax returns. The report is sorted and totaled by state. The sum of all the state totals (found on the grand totals page) may be used for the federal return. The report may be accessed through the Controllers Tax report menu [R03].

The report may be selected for:

• all assets
• a portfolio

The report may be automatically generated for each portfolio at the end of the month and the end of the year through the End of Period update [U0401]. Use the END OF PERIOD MODULES AND REPORTS screen under the End of Period Customizations option of the Portfolio update [U0212] to specify whether the report is created. (The end of month and the end of year reports are listed separately.)

The report is organized by all of the following:

• Portfolio
• State
• Tax type (True Lease and CSA)

The tax type is defined at the asset level when the asset is entered into the system through the Add Asset option of the New Lease update [U0101]. Tax type describes the categorization of the asset for tax reporting. There are two basic tax types:

• True Lease A ‘true lease’ is one which is considered a true lease (or operating lease) for tax purposes.
  
  
• CSA A ‘conditional sales agreement’ (CSA) is one which is considered a direct finance lease for tax purposes.

Taxable Income Selection

• ALL
  Enter ‘X’ to report on all assets. Leave blank to report on a specific portfolio.
  
  PORT
  Enter the number of the portfolio upon which to report. Leave blank if reporting across portfolios.

Taxable Income Report

The Taxable Income report [R0301] reports at the asset level and includes the following information:

• LEASE
  For informational purposes the current lease number is displayed. If the asset is in inventory (off-lease), no lease number is shown.
  
  
• ASSET
  The asset number is displayed.
  
  
• DESCRIPTION
  The asset description, as entered through the Add Asset option of the New Lease update [U0101], is displayed.
  
  
• STATUS
  One of following asset status classifications is displayed:
  
  
  • INVENTORY
    The asset is off-lease, in inventory. Assets are placed in inventory either through the Add Asset option of the New Lease update [U0101] or through the Termination option of the Payoff update [U0103].
    
    
  • ON-LEASE
    The asset is on-lease. Assets are placed on-lease through the Book Lease option of the New Lease update [U0101].
    
    
  • SOLD
    The asset has been sold. Assets are sold either through the Payoff option or the Sale of Asset in Inventory option of the Payoff update [U0103].
    
    
• YEAR-TO-DATE INCOME - ASSET
  The taxable income generated by the asset is displayed. For active assets with a tax type of true lease, the taxable income is either:
  
  
  • for CASH basis tax reporting, the cash receipts collected during the year, or
    
    
  • for ACCRUAL basis tax reporting, the net lease payment accrued during the year (net lease payment does not include use tax, recurring charges, or other assessments).

For assets with a tax type of conditional sales agreement (CSA’s), the taxable income is the interest income accrued during the year.

Any down payment is shown for true leases in the commencement year of the lease (or, if reporting on a cash basis, in the year that it was received).

Interim rent is included if the interim rent is considered a part of minimum lease payments receivable (refer to the INTERIM RENT field on the first screen of the New Lease Customizations option of the Portfolio update [U0212]).

For true lease assets paid off, sold or terminated during the year, the income is calculated as follows:

• for CASH basis tax reporting, all proceeds from sale is excluded from YEAR-TO-DATE INCOME - ASSET. Supplementary income reports have to be created.
  
  
• for ACCRUAL basis tax reporting, income on TERMINATIONS represents:

  BASE PAYOFF
  +/- GAIN / LOSS
  - BAD DEBT
  + NET LEASE PAYMENTS ACCRUED DURING YEAR (excludes use tax, assessments, recurring charges)

• for ACCRUAL basis tax reporting, income on PAYOFFS and SALES FROM INVENTORY represents:
  
  

• NET LEASE PAYMENTS ACCRUED DURING YEAR (excludes use tax, assessments, recurring charges)
  +/- GAIN / LOSS

• For CSA assets paid off, sold or terminated during the year, the income is calculated as follows:

  NET LEASE PAYMENTS ACCRUED DURING YEAR (excludes use tax, assessments, recurring charges)
  + RESIDUAL INCOME REDUCTION
  +/- GAIN / LOSS

• YEAR-TO-DATE INCOME - OTHER
  The year-to-date income from sources other than lease payments is displayed. The same recognition method used for recording other income for book purposes is applied to the reporting of other income for tax purposes. For example, if late charges are recognized on an accrual basis for book income, they are reported for taxable income when accrued. Likewise, if late charges are recognized on a cash basis for book income, they are reported for taxable income when received.

  YEAR-TO-DATE INCOME - OTHER is the same for both true leases and CSAs (i.e., there is no difference in the calculation based upon the tax type of the lease). YEAR-TO-DATE INCOME - OTHER contains:

  • All income assessments (e.g., late charges, collection fees, extension fees, etc.),
    
    
  • Recurring charges which are specified as an ‘income’ type, and
    
    
  • Interim rents (if not considered a part of minimum lease payments receivable).
    
    
• YEAR-TO-DATE INCOME - TOTAL
  The total amount of taxable income for the lease is displayed. It is calculated as follows:

  YEAR-TO-DATE INCOME - LEASE
  + YEAR-TO-DATE INCOME - OTHER

• IDC - EXPENSE YTD
  The year-to-date amortization of initial direct cost expense (for tax purposes) is displayed. The amortization of IDC for tax purposes may be different than the amortization of IDC for book purposes for the following two reasons:
  
  
  • IDC is amortized on a straight line basis for tax and on a proportional basis (with the recognition of lease income) for book, and
    
    
  • the total IDC amount (i.e., the IDC basis) may be different for book and tax.
    
    
• IDC - UNAMORTIZED
  The unamortized portion of tax IDC is displayed. This is the amount of IDC expense remaining to be amortized for tax purposes over the remaining life of the lease.
  
  
• TOTALS/GRAND TOTALS
  The page totals for the report reflect the number of assets and all dollar amounts for each portfolio, state, and lease type (true lease and CSA).The grand total for all states may be used as the taxable income amount for the federal tax return.

© 2001 by McCue Systems Incorporated.
All rights reserved.

The information contained in this document is the property of McCue Systems, Inc. Use of the information contained herein is restricted. Conditions of use are subject to change without notice. McCue Systems, Inc. assumes no liability for any inaccuracy that may appear in this document; the contents of this document do not constitute a promise or warranty. The software described in this document is furnished under license and may be used or copied only in accordance with the terms of said license. Unauthorized use, alteration, or reproduction of this document without the written consent of McCue Systems, Inc. is prohibited.