KEN KIRSCHENBAUM, ESQ ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE You can read all of our articles on our website. Having trouble getting our emails? Change your spam controls and whitelist ken@kirschenbaumesq.com ****************************** Tax or other consequence to lease or sale May 15, 2025 ************************** Tax or other consequence to lease or sale ************************** Ken We signed a new (2025 version) K&K commercial fire agreement to update and replace the existing agreement that was in place and add (sale portion) a Starlink radio. The agreement is for inspection, per call service and monitoring. Subscriber was having issues with their phone lines so this new (10 year) agreement was signed to update the existing and add a Starlink radio to replace the phone lines. Starlink Radio to remain our property. Today their CFO called and asked if we could change the invoice to state the installation charge is for a one year lease of the equipment. Seems to effect where the money will be coming from. I am not a lawyer or accountant, I want it to be proper and legal; could it be considered a lease if we retain ownership? Jeff ************************** Response ************************** Presumably you signed this subscriber up using a Fire All in One Agreement. It's common for the alarm company to retain ownership of the communication device, in this case the Napco Starlink radio. The Fire All in One specifically provides that ownership of the communication device may be retained by the alarm company and further provides that there is an agreed value for that device. While the Fire All in One does not refer to a "lease" the way the contract deals with the communication device it may as well be leased. Contrast this with the Fire All in One Lease; that contract provides that the entire fire alarm is leased, remaining the property of the alarm company. You may not have asked the question the same way the subscriber's CFO asked you, words do matter. I am not sure if the CFO is asking you to invoice, and confirm, that the term of the "leased" equipment is one year, or that your invoice is only for one year. The contract may provide for 10 year term or some other period you agreed to. The CFO wants a lease so the subscriber can deduct the payment in full as an expense rather than have to depreciate the expense as a capital improvement or purchase of equipment. In your case only the communication device is leased, not the entire system, so this tax consequence to both you and the subscribers seems trivial. Leasing as opposed to selling equipment does have different tax treatment and your accountant is the best professional to ask and guide you. ************************** STANDARD FORM AGREEMENTS: To order up to date Standard Form Alarm / Security / Fire and related Agreements click here: www.alarmcontracts.com *************************** CONCIERGE LAWYER SERVICE PROGRAM FOR THE ALARM INDUSTRY - You can check out the program and sign up here: https://www.kirschenbaumesq.com/page/concierge or contact our Program Coordinator Stacy Spector, Esq at 516 747 6700 x 304. *********************** WEBINARS: https://www.kirschenbaumesq.com/page/alarm-webinars *********************** ALARM ARTICLES: You can always read our Articles on our website at www.kirschenbaumesq.com/page/alarm-articles updated daily ******************** Wondering how much your alarm company is worth? Click here: https://www.kirschenbaumesq.com/page/what-is-my-alarm-company-worth *********************** THE ALARM EXCHANGE - the alarm industries leading classified and business exchange - updated daily ************************* PODCASTS: https://podcasts.apple.com/us/podcast/ken-kirschenbaum-presents/id1794851477 ************************* Getting on our email list / Articles archived: Many of you are forwarding these emails to friends or asking that others be added to the list. Sign up for our daily newsletter here: Sign Up. ************************** Ken Kirschenbaum,Esq Kirschenbaum & Kirschenbaum PC Attorneys at Law 200 Garden City Plaza Garden City, NY 11530 516 747 6700 x 301 ken@kirschenbaumesq.com www.KirschenbaumEsq.com
