Reference no: EM132669429

Problem - The Presence or Absence of the Amt

Bob and Carol are unmarried individuals who have been engaged for four months. They work for th same employer and earn identical compensation. They have the same amount of gross income, including the same amount of investment income, which consists solely of interest income; they have similar investments in tax-exempt bonds that produce identical amounts of interest income. They also have the same amount of deductions.

Bob's tax return is prepared by Adam, and Carol's tax return is prepared by Ava. While discussing their tax liability one day at lunch, Carol is dismayed to learn that she paid $15,000 more in Federal incom taxes than Bob did for the tax year. Carol meets with Ava that evening. Ava reviews Carol's tax return and assures her that her tax liability was properly calculated.

The above events raise a number of interesting questions for Bob and Carol that can be answered after completing this chapter. Why didn't Bob and Carol have the same tax liability? Were both tax returns properly prepared? Should Carol consider replacing her tax return preparer Ava with Adam? Is it possible and/or desirable for Carol to file an amended return? Should Bob do anything?