InterTAN, Inc. - Page 10

                                       - 10 -                                         
               We have recommended to Doug Saunders that InterTAN                     
               Canada Ltd. (Canada) [ITC] pay a dividend of $20 mil-                  
               lion (U.S.) to InterTAN, Inc. (ITI) [petitioner].   Our                
               recommendation was based upon a number of scenarios                    
               regarding Canada’s current year loss and the balance in                
               Canada’s post-1986 pool of earnings and profits (E&P).                 
               We have considered the dividend’s consequences based                   
               upon E&P calculated under what we consider to be the                   
               correct methods as well as E&P calculated consistently                 
               with the methods used in prior years, some of which we                 
               believe to be improper.  Our calculations and recommen-                
               dation are based upon the Company’s best estimates of                  
               income (loss) for Canada and ITI available at this                     
               With a $20 million dividend from Canada, ITI’s U.S. tax                
               for the fiscal year ending June 30, 1993 will be ap-                   
               proximately $1.2 million.  Without the dividend and the                
               benefit of the associated deemed paid foreign tax                      
               credits, ITI’s U.S. tax liability will be approximately                
               $4.9 million.  In the “best case” dividend scenario,                   
               ITI will have approximately $3.3 million of excess                     
                  *       *       *       *       *       *       *                   
               In order to avoid the Canadian withholding tax, the                    
               Company plans to structure the transaction as a return                 
               of capital for Canadian tax purposes while still being                 
               considered a dividend for U.S. tax purposes.  The                      
               Company plans to take the following action:                            
                    1.   Canada will borrow $20 million (U.S.) from                   
                         the bank and repay a portion of its debt owed                
                         to ITI.                                                      
                    2.   ITI will use the $20 million to purchase a                   
                         new class of preferred stock issued by Can-                  
                    3.   Canada will redeem the preferred stock for                   
                         $20 million.  It is imperative that this step                
                         be accomplished before the end of the fiscal                 
                    4.   After the end of the fiscal year, ITI will                   
                         make a new loan to Canada.                                   

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011