Section 467 Leases: Maximizing Tax Benefits While Minimizing Bankruptcy Risks

As the economy continues to face challenges and the threat of bankruptcy becomes more prevalent among businesses, landlords must be more vigilant in protecting their interests in commercial leases. One area of particular concern is leases that fall under Section 467 of the Internal Revenue Code ("Section 467 Leases").

Section 467 Leases can be a great way for landlords to maximize tax benefits. These leases allow landlords to spread out the recognition of income over the term of the lease instead of recognizing it all at once. Tenants may also take advantage of a Section 467 Lease by using it to sway sellers to structure the sale of a property as a ground lease transaction instead. This can be a cost-efficient way for buyers to finance the purchase and preserve an existing fee mortgage with potentially more favorable debt terms.