Assignment 3: Case Study

Eric Tymchuk is a former professional football player. He has amassed a fortune during his career and is involved in a few businesses. He has a 40 percent interest in the Bright Moon Fitwear Partnership. For 2018, Bright Moon earned a profit of $3,075,000. Eric also has a 50 percent interest in the Hi-Water Partnership. His brother owns the other 50 percent. For 2018, the partnership incurred a net loss of $1,385,000.

Eric is the sole proprietor of Erics Sports Equipment. Sales exploded in 2018 to $4,000,000, with expenses of $2,960,000. Eric is pleased but surprised at the unexpected results. However, another one of Erics sole proprietorships, Sneaker Sneaker, is not doing well. It has been in operation for less than two years, and Eric recognizes that it will take time to build up the business. For 2018, Sneaker Sneaker had sales of $880,000 and expenses of $2,845,000.

Eric has recently started a business in which he personally provides coaching services. Currently, he has two clients. He really enjoys this business and would like to grow it. Since this business has just started, he is operating it as a proprietorship.

Eric has a luxury cabin in Alaska that he and his friends and family use for vacations. In October 2018, the cabin was appraised at $1,200,000. Eric had purchased it years ago for $750,000. In December 2018, an avalanche destroyed most of the cabin. Unfortunately, he did not have avalanche insurance. After the avalanche, the cabin was appraised at $195,000. Eric has a number of rental properties scattered across the United States. When he first started playing football for Miami, he bought a house in that city. When he was traded to another team, he rented out his Miami house and purchased a house in the new city. This became his habit over the years. He pays a local property manager to look after each rental property. This has been a very profitable venture for him over the years, and he thinks he might invest in more rental properties.

In addition, Eric has a large portfolio of stocks and bonds that he holds personally. The money for these investments came from his endorsement fees.

Erics father has been giving him business and investment advice over the years. Erics brother and sister have been handling the bookkeeping and accounting for his businesses, with the help of a small staff composed of family members. Erics uncle has been filing his tax returns. Recently, Erics uncles health has declined, and Eric thinks that this is a good time to look for a new tax accountant. Erics father had always told him that he should keep the business about his businesses in the family, and Eric has hired as many family members as possible. However, Eric thinks that his businesses have outgrown his family and he needs outside help.

Eric is asking potential accountants to give him a memo addressing some of his main concerns. He will draw up his short list of candidates based on the memos. He met you at a charity event and has invited you to submit a memo. You have a new practice, and the fees from this potential engagement are significant.

Required:

Prepare the memo for Eric. Your immediate goal is to produce a memo that will get you on the short list. It is not necessary to provide minute details, but you must address Erics questions and provide recommendations. Be sure to properly support your recommendations so that Eric can understand why you made them.