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
Role
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.
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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.