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, 2016. The inclusion dollar amounts from the IRS table for the next five years are $47, $103, $153, $183, and $210.
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.