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Ahi Corporation is one of your clients in Hawaii. The company owes the IRS $100...

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Finance

Ahi Corporation is one of your clients in Hawaii. The company owes the IRS $100 million, due on March 15. There are no penalties or interest assessed by the IRS. One of Ahi s employees approaches you with the following plan to benefit from the so-called float on the large payment to the government. First, Ahi Corp. will courier its tax return and payment to the U.S. 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 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 3 percent after tax on its money, so the interest earned during these six days because of the float is $8,219 per day [($100,000,000 .03/365 days]. Thus, the total interest earned on the float for six days would be $49,314 ($8,219 6 days).

a. Would you recommend Ahi complete this transaction?

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

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