Problem $6-41($LO$.3,4)$

Ascend Corporation, a publicly held corporation, hired its current president, Lasya Lasisi, in September $2017$ at a base salary of $$1,000,000$

plus a bonus that is contingent upon meeting certain performance targets. Every year since she was hired, Lasya has earned a substantial

bonus. Her bonus in $2023$ is expected to be $$1,200,000,$ bringing her total compensation to $$2,200,000.$ Ascend Corporation's Board of

Directors is considering renegotiating Lasya's employment contract to provide a base salary of $$2,000,000$ with a new performance$-$based

bonus that specifies new targets.

Prepare a letter to Ascend Corporation's Board of Directors that identifies the amount of compensation that will be deductible by Ascend

Corporation in $2023$ and identifies any issues associated with changing the president's compensation and bonus plans. Address the letter to

the board chairperson, Angela Riddle, whose address is $150$ Erieview Tower, Cleveland, OH $44106.$

SWFT$,$ LLP

$5191$ Natorp Boulevard

Mason, OH $45040$

September $16,2023$

Ms$.$ Angela Riddle, Chairperson

Board of Directors

Ascend, Inc.

$150$ Erieview Tower

Cleveland, $OH44106$

Dear Ms$.$ Riddle:

I am responding to your inquiry regarding the current compensation plan for Ascend's president. The current plan has been in

place since $2017.$ It provides for a base salary of $$1,000,000$ plus a performance$-$based bonus that is projected to be $$1,200,000$

in $2023,$ resulting in projected total compensation of $$2,200,000$ in $2023.$ I understand that the Board is considering revising the

president's compensation plan.

In general, any salary paid to the president in excess of $

is deemed excessive executive compensation and not

deductible.

$2018,$ compensation earned under a performance$-$based compensation option

was not

subject to this limitation$.$ Since $2017,$ Ascend has been able to deduct base compensation of $

and

of the additional performance$-$based bonus. In $2023,$ we project Ascend deducted $$2,200,000$ in total compensation paid to the

president.

The Tax Cuts and Jobs Act $($TCJA$)$ of $2017$ made significant changes to this area of the law. Beginning in $2018,$ the annual limit

$$ compensation, commissions, and performance$-$based compensation unless these amounts were part of a

contract as of November $2,2017,$ and there have been no material modifications to the contract. Since the president's contract

was in nlace as of November $2.2017.$ and no material chanqes have been made to the contract. Ascend will $$ he able