26 U.S.C. § 178 — Amortization of cost of acquiring a lease

(a) General rule. Say a business (the lessee) buys a lease and wants to deduct its cost over time — for wear, obsolescence, or amortization. Normally that deduction is spread over the years left on the lease. But if less than 75 percent of what the business paid for the lease is tied to the years remaining on the original lease term (as of the day the business acquired it), then the law treats the lease term as if it also includes all renewal options — and any other period the parties reasonably expect the lease to be renewed for. This can stretch the deduction over more years. (b) Certain periods excluded. When figuring out, for purposes of (a), how many years are left on the original lease term as of the acquisition date, the law says: do not count any period the lessee could later add by exercising an option to renew, extend, or continue the lease. Only the years already fixed in the original term count for that calculation.