Annotated Bibliography On Tax Files

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Tax Research Memorandum Date: November 16, 2014 To: Tax Files From: Jonathan Ruhi Subject: Availability of Corporate Reorganization Summary of Facts Chris and Sue are 50 percent shareholders in BackBone personal service corporation. Backbone provides chiropractic services in four separate offices, in four small towns: Troy, Union, Vista and Willow. Chris is the main chiropractor in the Troy office, and Sue heads up the Vista office. Charlie, the main chiropractor in the Willow office, does not see eye-to-eye with Chris and Sue on management styles. Charlie is highly competent and well-liked by patients and therefore indispensable in the eyes of Chris and Sue. Chris and Sue may be willing to give Charlie control of the Willow office, but do not want to lose the profits this office adds to BackBone. A corporate reorganization seems to be a good alternative. Issue and Conclusion Is corporate reorganization an available option? If so, how should it be structured? What issues would be associated with this alternative? Corporate reorganization is definitely an available option. The company should be structured as a parent-subsidiary controlled group. The restructuring should be performed in conformance to any and all tax-saving codes and provisions. Law and Analysis With a divisive reorganization, BackBone can split off its Willow office as a new subsidiary corporation that is controlled by BackBone. By placing Charlie in charge of the newly formed subsidiary, Charlie
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