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Dennis Harding is considering acquiring a new automobile that he will use 1 0 0 % for business in the subsequent year. The purchase price
Dennis Harding is considering acquiring a new automobile that he will use for business in the subsequent year. The purchase price of the automobile would be $ If Dennis leased the car for five years, the lease payments would be $ per month. Dennis will acquire the car on January It will be his only business asset purchase of Assume that the inclusion dollar amounts from the IRS table for the next five years are $ $ $ $ and $
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 firstyear depreciation.
Click here to access the limits for certain automobiles. Click here to access the depreciation table to use for this problem.
If required, round your answers to the nearest dollar.
Question Content Area
Complete the letter to Dennis.
SWFT LLP
Natorp Boulevard
Mason, OH
December
Mr Dennis Harding
Avenue I
Memphis, TN
Dear Mr Harding:
I am writing in response to your request concerning the tax consequences of purchasing versus leasing an automobile. Our calculations are based on the data you provided in our telephone conversation.
If the automobile is purchased, the total cost recovery deductions for the five years will be $fill in the blank bbff
If the automobile is leased, lease payment deductions will total $fill in the blank bbff
In addition, you also must include a total
$fill in the blank bbff
in your gross income.
If you need additional information or clarification of our calculations, please contact us
Sincerely yours,
Ishita J Jones, CPA
Partner
Question Content Area
Complete the memo for the tax files.
TAX FILE MEMORANDUM
DATE: December
FROM: Ishita J Jones
SUBJECT: Dennis Harding: Calculation of lease versus purchase
Facts Dennis Harding is considering purchasing or leasing an automobile on January The purchase price of the automobile is $ The lease payments for five years would be $ per month. Dennis wants to know the effect on his adjusted gross income for purchasing versus leasing the automobile for five years.
Calculations
Purchase: Cost recovery deductions
$fill in the blank bbfffcb
fill in the blank bbfffcb
fill in the blank bbfffcb
fill in the blank bbfffcb
fill in the blank bbfffcb
Total cost recovery deductions $fill in the blank bbfffcb
If leased:
Total lease payments $fill in the blank bbfffcb
Inclusion dollar amounts
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