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You Are A Practicing Cpa At Gibbons, Johnson, &Tannun Llp. You Recently Received A New, Medium Sized Client, Abi Inc., Which Is A Construction Company

Question

You Decide

Scenario

Scenario/Summary

You are a practicing CPA at Gibbons, Johnson, &Tannun LLP. You recently received a new, medium-sized client, ABI Inc., which is a construction company. Since the tornado went through your town, ABI Inc. has had more projects than it can handle. ABI’s gross revenues for 20X2 were $12 million dollars, up from $350,000 in 20X1. Alex Lee, owner of ABI Inc., expects the revenues to grow by 30% for the next 3 years because cleanup of the devastating tornado will take that long.

Vanessa Monfort, the company’s bookkeeper, prepared the current year's 2012 tax returns for the corporation using an online tax program and feels she can prepare them again this year, but Matt Lever feels that he needs a CPA firm to prepare the company’s taxes this year.

Your Assignment

When the subject of alternative minimum tax is brought up in your meeting, Alex Lee is appalled that he will have to pay more taxes than he already has to pay. Vanessa Monfort thinks that the corporation is subject to the AMT. Your job is to explain what the AMT is and why he might have to pay it.

KEY PLAYERS

Scenario

You are a practicing CPA at Gibbons, Johnson &Tannun, LLP. You recently received a new medium-sized client, ABI, Inc., a construction company that works custom projects. Since the tornado went through your town, ABI, Inc. has had more projects than they can handle. ABI's gross revenues for 2010 were $12 million dollars, up from $150,000 in 2009. Alex Lee, owner of ABI, Inc., expects the revenues to grow by 30% for the next three years as cleanup of the devastating tornado will take that long. Vanessa Monfort, the company's bookkeeper, prepared the 2009 tax returns for the corporation using an online tax program and feels she can prepare them again this year, but Alex Lee feels that he needs a CPA firm to prepare their taxes this year.

Role

When the subject of Alternative Minimum Tax is brought up in your meeting, Alex Lee, the owner of ABI, is appalled that he will have to pay more taxes than he already has to pay. Vanessa Monfort, the company's bookkeeper, thinks that the corporation is subject to the AMT. Your job is to explain what the AMT is and why he might have to pay it.

Players 

Vanessa Monfort

Bookkeeper


 

Alex Lee

Owner of ABI, Inc.

Deliverable

Given the scenario, your role and the information provided by the key players involved, it is time for you to make a decision.<br><br>If you are finished reviewing this scenario, close this window and return to this week's You Decide item, in your course window, to complete the activity for this scenario.<br><br>You can return and review this scenario again at any time.

YOU DECIDE

Activity or Assignment

Assignment

Write a three- to four-page (12-point, double-spaced) memo to Alex Lee, explaining the following in terms that he will understand.

•    Explain the purpose behind the AMT.

•    Describe how and when the AMT is applicable.

 


Discuss what can be done to minimize the impact of the AMT.

Solution

Title: You Are A Practicing Cpa At Gibbons, Johnson, &Tannun Llp. You Recently Received A New, Medium Sized Client, Abi Inc., Which Is A Construction Company
Length: 6 pages (1250 Words)
Style: APA

Preview

Advance Federal Taxes and Management Decision

Introduction

AMT stands for Alternate Minimum Tax which is actually a tax count that includes certain duty inclination into the gross pay which has been balanced after the gross conclusions. For the most part, It is computed by adding back the favored conclusions to get AMT taxable income and then whatever exemption is applicable which is called as AMT exemption is subtracted to get the tentative minimum tax or TMT. This is then compared with the minimum tax liability to find out the tax liability as per the AMT.

Reason for the Introduction of AMT

The main and the most important purpose of the AMT is to just guarantee that the ultra rich citizens would not utilize the different assessment havens and finding to dispose of installment from every one of the charges. The reason for Alternative Minimum Tax was basically to ensure that ultra-rich citizens did not utilize expense safe houses and other arrangement of activity to fight off paying charges by any means.

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