How to Structure Sale-Leaseback Arrangements to Avoid Recharacterization
by William Bronchick
The sale/leaseback is a financing technique that has been used in the United States since the 1940's. Sale/leaseback transactions provide alternative methods of ownership, investment, financing and risk allocation
The transaction, in its most basic form, involves the sale of a property to an investor who holds title and leases the property back to the former owner. The lease is typically a long-term "net" lease, with the seller/tenant having the option of repurchasing at a later time. The seller/tenant reaps the benefit of favorable 100% "financing" and still retains the use of the property. The buyer/landlord receives the tax benefit of depreciation and a guaranteed long-ter...
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