| Course | AC566 Tax Research and Intro to International Taxation |
|---|---|
| Unit | Unit 5 |
| Paper type | Client letter |
| Length | About 760 words, 5 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | MS in Accounting |
| Updated | October 2026 |
Free sample paper for AC566 Unit 5
The Same Answer for the Person Who Asked: A Unit 5 Client Letter on Staking Rewards
[Student Name]
Purdue University Global
AC566: Tax Research and Intro to International Taxation
Unit 5 Client Letter
[Instructor Name]
[Date]
The client, the firm and every figure are composite; the ruling and textbook cited are real; this is coursework, not tax advice.
Letter
Hollins & Avery, CPAs February 24, 2027
Dear Ms. Varga,
You asked whether the ether you earned from staking last year counts as income for 2026, or only when you sold it in January. The short answer is that it counts as income in 2026, in the amounts shown below, and you will also report a small gain for 2027.
Why
When new ether arrived in your exchange account and you could move or sell it right away, the IRS treats its value on that day as income, much as interest credited to a savings account is income when it is credited, even if you leave it there. The IRS published this position in 2023 for people who earn staking rewards, and your situation matches it closely (Internal Revenue Service, 2023).
The Numbers
Your account received four deposits of 0.35 ether. Here is what each was worth on the day it arrived:
March 31: 0.35 ether at $2,400 each, $840. June 30: 0.35 ether at $3,100 each, $1,085. September 30: 0.35 ether at $2,700 each, $945. December 31: 0.35 ether at $3,500 each, $1,225.
Total 2026 income from staking: $4,095. This goes on your 2026 return as other income. Because you included this amount in income, it also becomes your cost for these tokens.
In January you sold all 1.4 ether for $3,000 each, or $4,200. Subtracting your $4,095 cost leaves a gain of $105, which goes on your 2027 return. You will not be taxed twice on the same value.
What to Keep
Please keep the exchange's year-end statement and the record of each reward deposit with its date. If the exchange's statement shows different values, we will use its figures and let you know. Keep your January sale confirmation as well. These records support the amounts on both returns if the IRS ever asks.
The Argument You May Have Seen Online
Some people argue that staking rewards are like a farmer's crop, newly created and not taxed until sold. One couple made that argument in a lawsuit, but the government refunded their tax before a court decided the question, so no court has ever agreed with it. The IRS rejects it. If you took that position, we would have to disclose it on your return to protect you from penalties, and you would probably face an IRS inquiry over about $4,000 of income. In our judgment, the cost and stress are not worth it.
The letter gives the answer first, the reason in an everyday comparison and the numbers in a short list, because the client asked a practical question and wants instructions and a list of records, not an account of the research.
A Note on State Tax
Your state follows the federal definition of income, so the same $4,095 will appear on your state return for 2026, and the $105 gain on your 2027 state return. There is nothing extra to do.
If You Keep Staking
Rewards will continue to count as income each time they arrive. A simple habit helps: note the date and the value of each deposit, or download the exchange's monthly statement. If you ever transfer tokens to a wallet outside the exchange, let us know, since the records are harder to rebuild afterward.
Next Steps
We will include the $4,095 on your 2026 return and the $105 gain on your 2027 return. If you plan to keep staking this year, please let us know, and we can set up a simple record of each deposit as it arrives so next year is easier.
This letter is based on the facts you gave us and the law as of today. If any fact is different, for example if you could not withdraw the rewards when they arrived, please tell us, because it could change the answer.
Sincerely,
Tax Associate, Hollins & Avery, CPAs
Note to the File
The letter omits citations deliberately; the supporting memorandum of February 18 contains the authority, starting from the broad definition of gross income (Gross income defined, 26 U.S.C. § 61, 2018), and the confidence assessment. Writing for clients means choosing what they need from the research, not repeating it (Sawyers & Gill, 2021).
References
Gross income defined, 26 U.S.C. § 61 (2018).
Internal Revenue Service. (2023). Revenue Ruling 2023-14 (Internal Revenue Bulletin 2023-33). U.S. Department of the Treasury.
Sawyers, R. B., & Gill, S. L. (2021). Federal tax research (12th ed.). Cengage.
Reading the AC 566 Unit 5 instructions
The fifth AC566 unit asks you to communicate research results to a client in a letter. Answer the client's question in the first paragraph, in one plain sentence. Explain the reason in everyday terms, using a comparison the client will recognize. Show the numbers simply, with each item and a total. Tell the client what will be reported, on which return, and what records to keep. If the client has likely seen a contrary argument, name it, explain it fairly and give the reason you advise against relying on it, including practical costs. Note any assumption that would change the answer. Keep citations out of the body, and say where the supporting research is kept. Use letter format with date, salutation and signature. The ruling and the research guide behind the advice go in an APA 7 reference list, not the letter body.
How the AC 566 Unit 5 example is put together
The sample letter opens with the answer: the rewards are 2026 income, plus a small 2027 gain. A paragraph compares the rule to savings account interest and notes the IRS's 2023 position. A list shows four deposits worth $840, $1,085, $945 and $1,225, totaling $4,095, then explains the $105 gain and why the client is not taxed twice. A records section names the exchange statement and sale confirmation. The online argument is explained, with the refund suit that never reached a decision and the disclosure it would require. Sections cover state tax and continued staking. The highlighted sentence explains the letter's structure, and a file note points to the memorandum.
AC566 Unit 5 rubric: what earns full points
Client letters in AC566 earn points for clarity, accuracy and usefulness to the reader. Graders check that the answer comes first, that the explanation uses plain language without losing accuracy and that figures are correct and easy to follow. The rubric rewards telling the client exactly what will be reported and what to keep, addressing contrary arguments the client may have seen, and stating the facts the advice depends on. Keeping citations out of the body while documenting authority elsewhere shows awareness of audience. Letters that repeat the memo's analysis, use jargon or omit next steps lose credit. Professional letter format and APA 7 references to the authority complete the work.
Common AC566 Unit 5 mistakes, and how to avoid them
Weak Unit 5 letters copy the research memo's structure and citations, which overwhelms a client who asked a simple question. Others oversimplify and lose accuracy, for example saying the rewards are taxed only when sold. Figures are presented in a paragraph the client cannot follow. Records to keep are not mentioned. A contrary argument the client has likely read is ignored, so the letter seems uninformed. Assumptions are not stated, leaving the client unaware of facts that would change the answer. If your section's letter follows a different memo, a writer can restate that conclusion in plain language with the same structure.
Get an AC566 Unit 5 example written to your instructions
The Unit 5 prompt, the memo or conclusion the letter builds on, anything known about the client, and the rubric that will grade it are all the letter needs. The letter answers first, translates every technical term, states the uncertainty in usable words and ends with numbered next steps. It arrives within 24-48h, and the first sample costs you nothing. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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AC566 Unit 5 questions, answered
How long should the letter be?
Long enough to answer, explain, quantify and direct, and no longer. The example runs about two pages, including a small table. Letters that reproduce the memo's analysis at length defeat the purpose, while letters under a page often omit the uncertainty or the next steps. Your section may set a length, and the example trims its explanation first if it must shrink.
Why mention an argument the firm rejects?
Because the client has likely encountered it and will wonder why her adviser ignored it. Naming it, explaining it fairly and giving the reason for declining it shows the reader that the conclusion was reached with the alternative in view. It also records, for the file, that the risk was discussed, which matters if the law develops later.
Where can I find a free AC566 Unit 5 sample paper?
This page holds a full AC566 Unit 5 client letter explaining staking reward income to a composite retired client, with a plain answer, a four-deposit list, records to keep, the online argument and APA 7 references.
Why doesn't the letter include citations in the body?
Because the client needs to know what to do, not how the research was done. The authority stays in the supporting memorandum, and a short file note points to it for anyone who reviews the work.
Will the client be taxed twice on the same tokens?
No. The $4,095 included as income becomes her cost for the tokens, so when she sold them for $4,200, only the $105 difference was taxed as gain.