A clothing manufacturer (a VIE entity) has two equity holders. Profits and losses of the Vie are split according to ownership %: therefore Equity holder 1 controls all decisions regarding distributing clothing in fulfillment of sales negotiated by Equity holder 2 on the VIE’s behalf. Equity holder 2 controls all the decisions regarding the design, manufacturing, pricing, and sales of the clothing. Determine which party, if any, is the primary beneficiary and explain briefly why.

A clothing manufacturer (a VIE entity) has two equity holders. Profits and losses of the Vie are split according to ownership %: therefore Equity holder 1 controls all decisions regarding distributing clothing in fulfillment of sales negotiated by Equity holder 2 on the VIE’s behalf. Equity holder 2 controls all the decisions regarding the design, manufacturing, pricing, and sales of the clothing. Determine which party, if any, is the primary beneficiary and explain briefly why.

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter18: Comparative Forms Of Doing Business

Section: Chapter Questions

Problem 12P

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