On January 1, 2020, a machine was purchased for $1,200,000 by Splish Brothers Co. The machine is expected to have an 8-year life with no salvage value. It is to be depreciated on a straight-line basis. The machine was leased to Sunland Inc. for 3 years on January 1, 2020, with annual rent payments of $250,000 due at the beginning of each year, starting January 1, 2020. The machine is expected to have a residual value at the end of the lease term of $562,500, though this amount is unguaranteed.

How much should Splish Brothers report as income before income tax on this lease for 2020?

Income before income tax

$