Maureen owns all of the stock in Green Corporation. Green owns 10,000 shares of Micro Corporation,...

Maureen owns all of the stock in Green Corporation. Green owns 10,000 shares of Micro Corporation, whose value has increased by 1000% since they were purchased eight years ago. Maureen would like to have the shares distributed to her, but she wants to avoid the tax bill that would result if they were distributed as a dividend from Green Corporation. Her son, who is taking classes for his MBA, has suggested that she create Brown Corporation with herself as the sole shareholder, and have Green transfer the stock to Brown. Following this, Brown could be liquidated, and she would receive the Micro stock in return for her shares of Brown. This would achieve capital gains treatment for Maureen. Maureen is your client. What advice would you give her about this proposed transaction, and what authorities would you cite?

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Expert Solution

Here in this case maureen is owning all the stock in green corporation, green owns 10000 shares of micro corppration.maureen wants to have a business relationshio with her but she dont want to pay tax where ishe has tovpay some money f.and her son suggested her to create brown corporation and maintain the organisation as soleholder.and yhen green transfered the atock to brown, following that brown wil be winding up the business afairs inretuen she wil receive a microstock in return for her shares of brown.it is a gain for maureen.

In many cases it is apparent thst the enwuiries concern attempts to avoid or minimise duty.here person who is enter to do transaction had to request the state revenue commisioner.it wil help them to decide whether if the transactiin were entered into,it would be an exempt relevent transaction.if a person who is proposing to enter into or carry out a tax avoidance scheeme,they can request state revenue commisioner to decide whether the general antiavoidence provision would be applied to the scheme.state revenue commissioner will help you to get some knowledge about duty implications of a proposed transaction.as a general rule,advice regarding the duty implications of other proposed transacyion will not be provided if duty position is not well established.it can be provided only when the duty position is well established and generally well known.

Authorities

Anti avoidence rule empowers the revenue authority.tax avoidence is the legal usage of the tax regime in a single territory to one's own advantage to reduce the amount of tax that is payable by means that are within the law.general anti provisions will be dealt with in accordance with section 269 of the duties act.

ekkarill92 answered 1 year ago

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