Are lessees more likely to be in higher or lower income tax brackets than lessors?

Explanation

The ownership of an asset is likely to provide tax shelter to the lessor in the early years of the asset's life through deductions in interest and depreciation expenses and the tax shelter is more profitable when the lessor is in high tax brackets, so in order to avail the profitability, the lessor is likely to be in high tax brackets.

Verified Answer

The lessors are likely to be in higher tax brackets because owning an asset provides tax benefit to the lessor in the initial years of the asset's life and the tax benefit is more profitable to the lessors in high tax brackets.