InterTAN, Inc. - Page 8

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          a memorandum addressed to Keith Wettlaufer (Mr. Wettlaufer),                
          senior vice president of petitioner and of ITC for finance and              
          administration (June 15, 1993 memorandum).  Mr. Thorpe reviewed             
          and initialed that memorandum.  The June 15, 1993 memorandum set            
          forth Price Waterhouse’s suggestions as to the steps necessary to           
          effect a dividend from ITC to petitioner that would avoid Cana-             
          dian withholding tax and generate sufficient foreign tax credits            
          to minimize petitioner’s anticipated tax liability for its                  
          taxable year ended June 30, 1993.  The June 15, 1993 memorandum             
               As you requested, this memorandum outlines the steps we                
               feel are necessary to pay a dividend from InterTAN                     
               Canada Ltd (Canada) [ITC] to InterTAN, Inc. (ITI)                      
               [petitioner] and avoid the Canadian withholding tax.                   
                    1.   Prior to paying the dividend, Canada should                  
                         repay all or a portion of the note payable to                
                    2.   ITI should then make a cash contribution to                  
                         Canada.  The purpose of this step is to in-                  
                         crease Canada’s paid in capital so the divi-                 
                         dend can be considered a return of capital                   
                         for Canadian tax purposes.  This step should                 
                         also be completed prior to paying the divi-                  
                    3.   Canada should pay the dividend on or before                  
                         June 30, 1993.                                               
                    4.   During the 1st quarter of the next fiscal                    
                         year ITI can make a new loan to Canada.                      
               We feel that the steps outlined above are necessary to                 
               help prevent the Internal Revenue Service from reclas-                 
               sifying the transaction as something other than a                      
               dividend and disallowing ITI’s deemed paid foreign tax                 
               credits associated with the dividend.  We also feel                    

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