I appreciate the overwhelming response and the insight!
I did leave that critical factor out, as it does get a little more complicated bringing in the business v. personal discussion. We used the standard mileage method of deducting approximately 75% of the miles driven on the car, with the other 25% being personal. I don't know if there's any depreciation recapture involved with that situation.
- No provision for refund or rebate in the lease.
- You are correct that it gave ME the option to purchase the vehicle for the residual, not the third party.
- The third party paid me directly the $8,000. They paid the lessor the $22k residual and got title to the car.
Is there any logic to the argument that the lease payments were, in essence, option payments for the RIGHT to purchase the car at a set price (the residual) along with the ability to drive it for a set amount of time. I could exercise the right to purchase at any point in the lease, but didn't exercise it. Instead, I opted to sell that right to the third party lease broker, who then exercised that right after it was sold to him. The lease payments are greater than the payment received, but not sure about depreciation recapture or whether I need to bifurcate how much of the lease payments was for the right to drive and how much was for the right to purchase. Gets very complicated very fast..
