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, 2017. The inclusion dollar amounts from the IRS table for the next five years are $59, $128, $191, $228, and $264.

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. Then prepare a memo for the tax files on these matters. Dennis’s address is 150 Avenue I, Memphis, TN 38112.