Dennis Harding is considering acquiring a new automobile that he will use 100% for business. The purchase price of the automobile would be $48,500. If Dennis leased the car for five years, the lease payments would be $375 per month. Dennis will acquire the car on January 1, 2014. The inclusion dollar amounts from the IRS table for the next five years are $19, $42, $63, $75, and $87.
Dennis wants to know the effect on his adjusted gross income of purchasing versus leasing the car for the next five years. He does not claim any available additional first year depreciation. Write a letter to Dennis and present your calculations. Also prepare a memo for the tax files. His address is 150 Avenue I, Memphis, TN 38112?