Company Name: Leastec Corp.
Public Availability Date: Jan. 9, 1984

INQUIRY LETTER

Brewer & Coombs
Creekside Professional Center,
177 Front Street
Danville, California 94526
TELEPHONE (415) 837-6000

October 12, 1983

1933 Act/3(a)(11)
Rule 147

Chief Counsel
Division of Corporate Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Leastec Corporation

Gentlemen:

We represent Leastec Corporation, a California corporation ("Leastec"). Leastec intends to sponsor a California limited partnership to be formed to purchase equipment and lease the equipment to third party lessees. Leastec will be a general partner in the limited partnership.

The proposed limited partnership will be formed in California and its principal place of business will be located in California. The partnership will not have offices or employees located outside the State of California. Limited partnership interests will be offered and sold only to persons who are residents of California. The partnership intends to use the proceeds of the offering in connection with the operation of a business in California. The partnership will enter into "operating leases", wherein the aggregate rental payments are less than the cost of the equipment. The partnership may also enter into "full payout leases", wherein the aggregate rental payments are at least equal to the cost of the equipment. It is anticipated that a portion of the equipment will be located outside the State of California.

In this regard, we are requesting your opinion on a proposed method for determining whether the partnership is operating its business in California, as required by Section 3(a)(11) and Rule 147. The specific issue is how to determine the location of the partnerships assets for purposes of paragraph (c)(2) of Rule 147.

In Eastern Leasing Corporation, SEC Staff Letter (April 20, 1979), it was concluded that "finance leases" were lease receivables which were located in the issuer's home state, despite the fact that the equipment was located out of state. The leases provided that the total rent payable over the lease term was equal to the purchase price plus interest and each lessee had a six percent purchase option which invariably was exercised.

The terms "operating lease", "full payout lease" and "finance lease" are terms which are commonly used in the equipment leasing industry, but such terms are not uniformly defined. We have advised Leastec that the partnership should not rely on these industry characterizations in determining whether its assets are located in California.

The Financial Accounting Standards Board ("FASB") has promulgated Statement No. 13-Accounting for Leases. FASB Statement No. 13 sets forth standards by which lessors are to determine whether a lease transaction is an "operating lease", a "sales type lease", or a "direct financing lease". A copy of FASB Statement No. 13 is enclosed for your reference. In general, "operating leases" are reported as if the lessor is the owner of the equipment. "Sales type leases" and "direct financing leases" are reported as if the lessor sold or financed the equipment. The Securities and Exchange Commission has required that public companies conform their financial statements to FASB Statement No. 13 (Accounting Series Release No. 225).

FASB Statement No. 13 is perhaps the only uniform standard for distinguishing between operating leases and sale/financing transactions. It would be helpful if the partnership could rely on FASB Statement No. 13 for purposes of Rule 147. For example, under an operating lease, the partnership's asset would be the equipment and the location of the equipment would be determinative. On the other hand, a sales type lease or a direct financing lease would be a lease receivable which would be located in California regardless of the location of the equipment. Accordingly, we request your opinion that the partnership may rely on the characterization of a transaction under FASB Statement No. 13 in determining whether its assets are located in California.

We would appreciate your opinion on this issue. If you have any questions, please contact the undersigned.

Sincerely,

Roger D. Ehlers

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STAFF REPLY LETTER

December 9, 1983

RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF CORPORATION FINANCE

Re: Leastec Corporation ("Company")
Incoming letter dated October 12, 1983

After consideration of the information contained in your letter, it is the view of this Division that for purposes of Rule 147, the Company may rely on the characterization of lease transactions under FASB Statement 13 to determine the location of equipment leases. Thus, operating leases would be deemed located where the equipment subject to the leases is used, while sales type leases and direct financing leases would be considered located at the lessor's place of business.

Because this position is based upon the representations made to the Division in your letter, it should be noted that any different facts or conditions might require a different conclusion.

Sincerely,

John J. Gorman
Special Counsel