Question

Jon Williams, PA, has found himself in the middle of the real-life soap opera “Taxing Days of Our Lives.”

The cast of characters:
Oneway Corporation is Jon’s audit and tax client. The three directors are the officers and also the only three shareholders, each owning exactly one-third of the shares. President Jack founded the company and is now nearing retirement. As an individual, he is also Jon’s tax client. Vice-president Jill manages the day-to-day operations. She has been instrumental in enlarging the business and its profits. Jill’s individual tax work is done by PA Phil.
Treasurer Bill has been a long-term, loyal employee and has been responsible for many innovative financial transactions and reports of great benefit to the business. He is Jon’s close personal friend and also an individual tax client.

The conflict:
President Jack discussed with PA Jon the tax consequences to him as an individual of selling his one-third interest in Oneway Corporation to Vice-president Jill. Later, meeting with Bill to discuss his individual tax problems, Jon learns that Bill fears that Jack and Jill will make a deal, put him in a minority position, and force him out of the company. Bill says, “Jon, we have been friends a long time. Please keep me informed about Jack’s plans, even rumours. My interest in Oneway Corporation represents my life savings and my resources for the kids’ university. Remember, you’re little Otto’s godfather.”
Thinking back, Jon realized that Vice-president Jill has always been rather hostile. Chances are that Phil would get the Oneway engagement if Jill acquires Jack’s shares and controls the corporation. Nevertheless, Bill will probably suffer a great deal if he cannot learn about Jack’s plans, and Jon’s unwillingness to keep him informed will probably ruin their close friendship.
Later, on a dark and stormy night, Jon ponders the problem. “Oneway Corporation is my client, but a corporation is a fiction; only a form. The shareholders personify the real entity, so they are collectively my clients, and I can transmit information among them as though they were one person, right? On the other hand, Jack and Bill engage me for individual tax work, and information about one’s personal affairs is really no business of the other. What to do? What to do?

Required:
Give Jon advice about alternative actions, considering the constraints of the ICAO’s Rules of Conduct.



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  • CreatedJanuary 09, 2015
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