Based upon the following Case Study, prepare the following:
(1) An internal office memorandum to the file detailing your research conclusions for the issue(s) contained in this Case Study. The format for the memorandum may be either as shown in the Raabe Text or as we have discussed in class; and
(2) A letter to your client communicating the findings of your research and recommending a course of action.
It is October 16, 2014. You are a tax accountant for a local prestigious CPA firm. You are finishing-up work on several files for returns. when you get the following email from Lynn Tran, an old friend from your days at UTA.:
It has been a long time since we have spoken. I want to bring you up-to-date with my life and to ask your advice.
As you know, I was graduated from UTA in the Spring of 2012 with a degree in exobiology. Although I was fearful of not getting a job, I was quickly hired by the Umbrella Corporation (a U.S. domestic company). Umbrella hired me to collect samples of flora and fauna in various parts of the world for further study and research. You must remember my excitement when my first assignment was to be part of a research team located at Iguassu Falls in Argentina.
Iguassu was wonderful with its subtropical climate and lush foliage. The falls were spectacular! I arrived in Iguassu on January 1, 2013. The company appreciated my work and offered me a promotion. I was to head the research team examining "ice cores" which the company was drilling in Antarctica. We hope to find new forms of ancient life in the ice which has been dormant for centuries.
I arrived in Antarctic on January 1, 2014 in the middle of their summer. Antarctic is not a bad place. The penguins are cute and you learn to tolerate the -30 degrees in July and August. The company made arrangements with the Argentine government and we are living at their military base - Esperanza Base, Hope Bay, Antarctica.
Now for my question. You previously advised me that since I would be living in Argentina, I could claim the foreign-earned income exclusion for 2013. Since my salary was $95,000 in 2013, the exclusion eliminated my U.S. income tax. This was great as Argentina has a flat 20% tax on my salary.
In Antarctica, my salary is $120,000 with a housing allowance of $20,000 that I pay to the base. I would like you to advise me if I can still claim the exclusion and how much the exclusion is for 2014. Since Argentina will be taxing my salary and housing allowance, the exclusion will come in handy.
I hope you are doing well and that you will write soon. As my internet connection is not secure since we share the computer terminal with others on the base, please send me a written letter to the address below.
Lynn Tran
Your friend
Lynn Tran
Base Antarctica Esperanza
Hope Bay, Antarctica, Argentina