@delta737h, thank you for clearing this up!
Based on the rule posted by @Rsantoro12 and @delta737h’s analysis, the tax base when tax is not capped should be:
tax base = sum of monthly + taxed incentives + upfront fees (excl. gov’t fees)
When the tax is capitalized, the capitalized tax amount (T) should be:
capitalized tax amount = (tax base * tax rate)/(1 - tax rate)
Referring to @delta737h’s memo, K should equal to the tax base listed above, since acquisition fees, dealer fees, and manufacturer’s rebates are generally taxed (unless things are different in NY).