Features

Highlights of the latest equipment leasing news from around the country.

With bonus depreciation gone, even equipment leasing companies that do not make any more book profit in 2005 than they did in 2004 may nonetheless find themselves facing sharply higher tax liabilities. In fact, 2005 taxes will be especially painful: First, equipment leasing companies will not have the advantage of applying bonus depreciation to new assets, so they have lost a substantial deduction. Second, depreciation is a zero-sum game. You can speed up or slow down the schedule, but you can never depreciate more than 100% of an asset's cost. So if you depreciate and deduct more than 50% of the value in its first year, there is significantly less value available to depreciate in subsequent years.

The leasing industry is going through wars again. In addition to bankrupt industrial companies and retailers, airlines are either in bankruptcy or teetering on the brink of a Chapter 11 filing. Such precarious times engender a host of issues for lessors, the paramount question of course being "do I get paid?" Key to that is what lessors are entitled to for the "post-petition" phase, the time between the date of the bankruptcy filing and the date the lease is either assumed or rejected by a bankruptcy trustee or a debtor in possession ("DIP"). Fractious court decisions have made it uncertain how and for how much lessors may recover for post-petition contractual lease obligations, but now a new appellate court decision may prove to be the turning point toward victory for the leasing industry.

Features

The Second Circuit recently handed down a key creditors' rights decision <i>Sharp Int'l Corp. v. State Street Bank &amp; Trust Co.</i> (<i>In re Sharp Int'l Corp. &amp; Sharp Sales Corp.</i>), 2005 U.S. App. LEXIS 5241(2d Cir. Apr. 1, 2005). The court affirmed the lower courts' finding that a secured lender was <i>not</i> liable for aiding and abetting management's breach of fiduciary duty, and <i>not</i> liable for receiving a $12.25 million loan repayment from a closely held borrower it correctly suspected of engaging in massive fraud. The decision limits the scope of a lender's duties to its borrower and other creditors. Absent the lender's participation in its borrower's fraud, the lender should have no liability on a fraudulent transfer theory or on any other basis at least in New York, where <i>Sharp</i> arose.

The latest doings.

Features

New York City's 2006 Executive Budget, recently passed by the NY State Legislature (S5568/A8434), significantly changes the NYC Unincorporated Business Tax (UBT) rules. Assuming the law is signed by the governor, as expected, law firms working in NYC will need to adjust to changes in three areas.

The resolution of a class action almost always involves an award of attorneys' fees to plaintiffs' counsel, as part of the overall settlement or based on a separate hearng. But insurance companies often resist paying these awards. They contend that the awards constitute penalties or do not constitute insured compensatory damages. They also sometimes contend that the awards are not covered because they are derivative of uncovered claims.

Features

This article nicely complements last month's A&amp;FP special edition on "Putting Business Intelligence to Work." Not only does Warren Knowles introduce another interesting software product, but he also explains clearly how the firm's BI software has come to have multiple points of contact with the firm's other application software systems.