Congratulations, you are the new controller for the Holy Temple. A week before you started, the Temple hired The Most Reverend Dwight as its spiritual leader. His contract was negotiated without your input. As he understands it, he is entitled to the following:

Salary	$120,000	Annually
Parsonage (Officially Designated)	$20,000	Annually
Accountable Reimbursement Plan (ARP)	$5,000	Maximum, monthly
Family Medical Insurance	$12,000	Cost to the temple
Group Life Insurance	$250,000	Coverage

Rev. Dwight is new to the ministry and wants very much to do things by the book. He is under the impression that he does not have to pay taxes on anything. You are nervous about giving advice to the reverend and contact the church treasurer –Virginia Beach. Unfortunately, Ms. Beach is a surf board sales representative and does not understand the issues. Other members of the board asked about excess compensation and IRS sanctions – they are very concerned. Ms. Beach asks you to determine all of the key issues and research them. You will incorporate all of these issues into your memos below.

Deliverable 1

1. Prepare a detailed memo to Ms. Beach, the temple treasurer, explaining the most appropriate way to handle the issues identified. (Remember Ms. Beach is not an accounting expert.)
   1. Your memo should begin: Ms. Beach, I have reviewed the compensation package of Reverend Dwight. Below is a list of key issues, the way I believe we should address the issues and authoritative references that support my conclusion.
   2. Be sure to support explanations with IRS regulation references.
   3. Cite sources and explaining it to her in plain English.
   4. Explain the worst case scenario if the church does not properly handle the issues including any concern about excess compensation and IRS sanctions.

Deliverable 2

1. Prepare a letter or email to Reverend Dwight:
   1. Answering his question regarding the taxability of his income. Make recommendations with regards to his options and FICA/SECA.
   2. Explaining Which items are taxable and which are not – and why.
   3. Explain what records he must keep with regards to his accountable reimbursement plan and why. Remember, he is a man of the cloth and is likely unfamiliar with tax issues. The letter will go out over Ms. Beach's signature.

Answer rating: 100% (QA)

MEMORANDUM Ms Beach I have reviewed the compensation package of Reverend Dwight Below is a list of key issues the way I believe we should address the ... View the full answer