Melinda Has Been Referred to You by One of Your

question 124

Essay

Melinda has been referred to you by one of your clients.In the past,she has prepared her own income tax returns,but she has become overwhelmed by the increased complexity of the tax law.Consequently,Melinda wants you to prepare her return for calendar year 2011.In reviewing her 2010 return,you note that she has claimed as a deduction the entire cost of a business building that should have been capitalized and depreciated.What course of action should you follow?

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Definitions:

Fixed Cost

Costs that do not vary with the level of output or sales, such as rent, salaries, and insurance.

Total Miles Driven

The cumulative distance that a vehicle has traveled, often used for business accounting or to monitor vehicle performance and maintenance needs.

Gasoline Costs

The expense incurred from purchasing gasoline, often considered a significant variable cost for companies dependent on transportation.

Truck Drivers

Individuals who operate trucks to transport goods and materials from one location to another.