Memorandum -New TAX Inversion
Prepare a MEMORANDUM as if you were asked to do so in your job. Put simply, the idea is not to write everything that you know or might know about tax inversions and the government’s response. Rather you should prepare a concise, cogent and coherent memorandum addressing the questions raised in the assignment.
Assignment: You are the tax manager of a company that manufactures a unique piece of equipment that combines hardware and software and is used to diagnosis patients with incipient alzheimer’s disease. The patented combination of the software and hardware makes the product unique and allows your company to sell the product at very high profit margins. The CFO of the company advises you that the company is considering acquiring a smaller company “Ireco” that is incorporated and based in a low tax foreign country. The reason for the acquisition is that the foreign company manufactures a different product that could be sold in conjunction with or as an add on to your company’s product. That product does not sell a premium price so that its profit margins are significantly lower.
The CFO tells you that he has heard that if the Company does a tax inversion in connection with the acquisition that it might result in significant tax savings. She tells you that she is not familiar with inversions or how they work
She has asked you to prepare a memorandum explaining tax inversions, how they could be used in the proposed acquisition and how they could result in a tax savings. She says that one of her counterparts at another company has told her that the US Treasury has issued guidance that will reduce or eliminate those tax benefits and that your memorandum should address that guidance as well.