Is a sales-leaseback considered a bona fide sale?

Technical topics regarding tax preparation.
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Hi,

I have a client who did a sales-leaseback for some software they own. The software was sold to the purchaser and leased back by my client for the next 10 years. Also, there is a purchase option at the end of the lease term but it appears to be less than FMV.

I have a couple of questions:

1) Is this considered a bona fide sale? Does my client recognize gain? The assets were sold to the seller at net book basis. It seems like under section 1001(a) it would be. But I wanted to confirm.

2) Does having a purchase option at the end of the lease that is not FMV make the sales-lease back transaction disqualified?

3) If it's not considered a sales-leaseback, does this mean the seller will still report the fixed assets and depreciation on their return?

Thanks in advance for any suggestions.
 

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