ACC 331
Spring 2015
Writing Assignment
A senior manager at the CPA firm where you are employed forwarded you an e-mail from a client. The senior manager asks you to write a one to two page memo to Wayne Nesbitt, the manager on the account, explaining the relevant tax issues and providing advice to the client. The senior manager says you must give the memo to Wayne Nesbitt at the beginning of your regular meeting time on Thursday, March 19, 2015. Here is the e-mail:
Dear Matt:
(It is September 2014 and) MTL Inc. is considering the disposal of two assets. We would like to get a better understanding of the tax consequences of these proposed transactions.
The first asset is land we acquired in 2010 for $340,000. We do not think the land is going to continue to appreciate, so we want to get rid of it. We have two options with respect to the land. First, we have identified a buyer who is willing to purchase the land for $400,000. Second, we have identified another party willing to exchange land with us.
The second asset is stock we purchased in April of this year for $210,000 but that has not been performing well in the market. We can sell the stock for its current fair market value of $150,000. Our CFO has asked me to look into identifying another party to exchange stock with, but I’m not sure that makes sense.
As always, the CFO wants us to defer income and accelerate deductions whenever possible. I’m not sure if we are going to sell any other assets during the year. We expect to have another very profitable year. Let me know your thoughts on the above.
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