InterTAN, Inc. - Page 9

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               that varying the dollar amounts involved in the various                
               steps by a significant amount (say $1 million) will                    
               help reduce exposure.  The actual amounts to be paid                   
               will be determined after final projections are com-                    
               pleted.  It is our understanding from previous conver-                 
               sations with Doug Saunders that this transaction will                  
               avoid the Canadian withholding tax.                                    
               On June 15, 1993, the June 15, 1993 memorandum was sent by             
          facsimile to Mr. Wettlaufer.  On June 24, 1993, a copy of the               
          June 15, 1993 memorandum was sent by facsimile to Mr. Saunders              
          who was in Paris, France.                                                   
               After reviewing the June 15, 1993 memorandum, Mr. Saunders             
          suggested certain changes to the steps of the proposed transac-             
          tion outlined in that memorandum.  Mr. Saunders suggested that,             
          instead of contributing cash to ITC, petitioner should purchase             
          preferred stock from ITC and ITC should redeem that preferred               
          stock.  Mr. Saunders made that suggestion because he was con-               
          cerned that the contribution of cash described in the June 15,              
          1993 memorandum would not result in paid-in capital for Canadian            
          withholding tax purposes.  In that event, the payment of a                  
          dividend by ITC to petitioner would have the undesirable result             
          of triggering the imposition of such a tax.                                 
               Mr. Bond prepared a memorandum to petitioner’s tax file                
          dated June 28, 1993 (June 28, 1993 file memorandum).  That                  
          memorandum incorporated the suggestion made by Mr. Saunders to              
          avoid imposition of the Canadian withholding tax.  The June 28,             
          1993 file memorandum stated in pertinent part:                              

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