In a sale/leaseback transaction, where the lease is a financing lease, should you pay the indebtedness tax with the recording of the lease memorandum? Historically, we have not because Tennessee does not appear to distinguish between real and financing leases. But we were discussing the issue and an argument could be made that the tax should be paid. What's your practice/experience?

I have never paid indebtedness tax on a sale leaseback. It seems to me that if you did you would give weight to the argument that the transaction was really a mortgage and thereby perhaps jeopardize the federal income tax treatment. You are, of course, paying transfer tax on the deed.