ACC 331 – Spring 2020 Writing Assignment Amy Lewis, a senior manager at the accounting firm where you are employed, forwarded you an e-mail from a client (Lillian Trainor, the CFO of Seider Corporation). Amy asks you to write a memo to Caroline Schmidt, the firm’s partner on the account, explaining the relevant tax issues and providing advice to the client. Amy wants you to have the memo ready for Caroline on Wednesday, February 26, 2020. Here is the e-mail from Lillian: Hi Caroline: Seider Corporation had a terrific 2019 fiscal year! As a result, Seider’s Board of Directors rewarded me by approving the following compensation in addition to my regular $300,000 annual salary: • $75,000 cash bonus • 500 shares of Seider stock • 200 non-qualified stock options (NQOs) • 100 incentive stock options (ISOs) The $75,000 bonus check was ready for me on December 31, 2019, but I did not pick it up until January 4, 2020 because I was on vacation. I received the 500 shares of Seider stock on January 1, 2020 when the share price was $80. I plan to sell the shares on December 15, 2020 when the share price is expected to be $95. The NQOs and ISOs were granted on January 1, 2020 and vest on December 31, 2020. Each option gives me the right to purchase 10 shares of Seider stock for $80 per share. Seider’s share price is expected to be $95 at the end of 2020, so I am thinking I will exercise all of the NQOs and ISOs on the date they vest and sell the shares that same day. Seider has a “clawback” provision that requires me to repay this additional compensation if the company has to restate its earnings. I want to understand how this additional compensation will affect my tax returns for 2019 and 2020. I was also wondering if there is anything I should do differently to reduce my tax liability. As you may recall, I am in the top marginal tax bracket for individual taxpayers. I look forward to hearing from you soon! Thanks, Lillian Trainor CFO, Seider Corporation Note: The assignment will be graded by the EY Communication Center (EYCC) to provide you individualized professional feedback on your writing skills. Completed assignments should be turned in at the beginning of class on Wednesday, February 26, 2020. Late assignments will not be accepted. Plagiarism, copying, or other academic misconduct will result in a zero for this assignment and may be reported to the Dean’s office. Here is a link to a video recording of EYCC’s presentation on business memo writing: https://mediaspace.msu.edu/media/Writing+Professional+Memos/1_m67ew3gi
Purchase answer to see full attachment