What potential ethics issues do you see in this situation

Assignment Help Taxation

Reference no: EM132498113 , Length: word count:1500

Ahi Corporation is one of your clients in Hawaii. The company had a good year last year and owes the IRS $100 million, due on March 15. There are no penalties or interest due to the IRS. One of Ahi's employees approaches you with the following plan to benefit from the so-called "float" on the large payment due to the government.

First, Ahi Corp. will courier its tax return payment to the US Virgin Islands. There, the tax return will be mailed to the IRS service center in Fresno by certified mail on the return's due date, March 15. By doing this, the employee thinks that it will take at least six days for the tax return to reach the IRS and for them to cash the $100 million check. Ahi can earn 7% after tax on its money, so the interest earned during
the six days because of the float is $19,178 per day ($100,000,000x0.07/365). Thus, the total interest earned on the float for six days would be $115,068. ($19,178 x 6 days).

a) Would you recommend Ahi complete this transaction?

b) What potential ethics issues do you see in this situation?

Please write an essay explaining the answers to each question and your reasoning (properly sourced) for your answer to each question.

Reference no: EM132498113

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