Question

Chris is the president and sole shareholder of MSI Corporation. He also lends money and rents a building to the corporation. Discuss how these business relationships between Chris and MSI Corporation can help avoid double taxation. What limitations are there on the use of such relationships?

In your analysis, include:

An introduction

Discussion

Conclusion.

Answer 1

Introduction:

As per the given situation, we can see that Chris is an individual who is the president of MSI Corporation. He is also the sole shareholder of the Company. Along with this, Chris has also lent money and rented a building to the corporation. Thus, Chris is acting as a Key Managerial Person as well as Shareholder. Chris has lent money to the Company thus the company is liable to repay the same to him. also, Chris has given his building on rent so as a result, the company shall pay the amount of rent to him. Discussion: Now, we can see from above that there are a lot of transaction between Chris and MSI Corporation. This results in avoidance of Double Taxation. This is because of the business relationships that exist between both of them. Had the above transaction been done by a person who is not having any business relationship with the company, it would result in Double Taxation. Since the incidence of tax and payment of tax is to be done by one person and the other person being related to it shall not have to pay the tax again to the same it shall lead to avoidance of double taxation. Conclusion: Hence, we can conclude that since there is business relationships between Chris and MSI Corporation, there is avoidance of Double Taxation on various transactions.