Final answer:
Leasing property to a corporation mitigates double taxation, as corporations can deduct lease payments, reducing taxable income and transferring income to possibly lower personal tax regimes. Additionally, it can reduce non-income based taxes such as property tax, since those are generally borne by the property owner.
Step-by-step explanation:
Leasing property to a corporation can be an effective method of mitigating the double tax on corporate income because it allows for tax deductions. When a corporation leases property, it can deduct lease payments as a business expense, reducing its taxable income. This can potentially lower the corporate income tax the corporation must pay. Additionally, when the owner of the property receives rent, it is taxed at their personal income tax rate, which might be lower than the corporate rate. Thus, the lease payments transfer income out of the higher corporate tax regime into a lower personal tax regime.
Furthermore, leasing rather than owning the property can help a corporation avoid some non-income based taxes, such as property tax. Corporations are subject to various taxes including property tax, payroll tax, and excise tax. However, since these taxes are usually the responsibility of the property owner, by leasing instead of owning, a corporation may reduce its overall tax burden. This benefit holds with the understanding that state or local governments impose these taxes, but it gives companies the flexibility to structure their business operations in a tax-efficient manner.