The Bad AssetsAnshuman Parikh, Natalie Lewis, Mara Rosenstock, Brad Wolters

Overview 1. Replacement country chosen2. Created subsidiary network to reduce federal income liability3. Offered profit deductions for purpose of tax decreasesBest Country: TuongComparisons: Tuong KhayaliCorporate Tax Rate 16% 18%Economic State One of the regions most

rapidly growing economies. Weathered the recession with stimulus package.

Declining exports and labor shortages.

Currency High inflation: 5.2% Lower inflation: 3.4%Workforce High-skill labor available Labor shortages, especially

among citizens of KhayaliTax on Dividends from foreign countries

No Yes

Required staff from country >51, with 85% citizens 25% citizens employed

Extra benefits in Tuong: For annual sales < $7.25 million- Accelerated depreciation of certain fixed assets. - Deduction of 25% of the value of gross income attributable to intangible property – all

of our sales are attributed to intellectual property, which is an intangible. Why the high inflation rate in Tuong is not an issue:

- The high inflation rate is due to a stimulus package of $16 billion they recently deployed. This should be curbed in the near future.

We will create a three-tiered structure of subsidiaries stemming from the original Pandemonium Corporation. All of the subsidiaries will be based in Tuong, however the original company will continue to be located in the US. Round Island Two will be fully owned by Pandemonium US, and will in turn own two companies, PACS Holdings and Pandemonium Operations Tuong.

PACS Holdings: PACS will pay the majority of the R&D costs that are incurred by the company, and will enter an intellectual property sharing agreement with Pandemonium USA. This gives PACS the right to sell licenses for selling the apps. They will sell this to Pandemonium Operations Tuong, who will pay PACS for the license, and then sell the product under its own name.

Pandemonium Operations Tuong: This Company will buy the license to sell the app from PACS and then proceed to sell the app on the app store and collect revenue.

Tax: The revenue will be taxed by the federal government in Tuong at a rate of 16%, as opposed to the US federal government’s corporate income tax rate of 35%. In addition, our profits will be diminished by 25% for tax purposes, because all of our income is due to intangible property. This means that in relation to the US, the corporate tax rate is actually 12% on our income, or 23% lower.

How this works: The IRS does not tax the various transactions that occur between these companies, because (according to the check-the-box rule in Subpart F, the transfer pricing regulations, of corporate tax code) these are not technically separate entities. The reason for having two companies on the lowest tier of this structure is so that we can avoid having Pandemonium USA involved in the process at all, and therefore avoid having to pay US federal income taxes.

Extra options to diminish tax liability given tax statements:A) Use R&D tax credits recently upped by Obama for all US-based R&D spendingB) Use accelerated depreciation (double-declining method) to apply highest expenses to

our apps now.

Alternative relocation options: Puerto Rico (4% corporate income tax rate), Ireland/Singapore (tax codes designed for subverting US federal income tax).