On 10th March 2022 SS Inc. (an Australian listed firm that pays corporate tax rate of 30%) announced that it is conducti

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On 10th March 2022 SS Inc. (an Australian listed
firm that pays corporate tax rate of 30%) announced that it is
conducting an off-market share buyback under tax determination
TD2004/22. SS announced the buyback price to be $8.50 per share
with capital component of $2.55 and the remainder treated as a
fully franked dividend. Deemed consideration for the buyback has
been determined to be $9.17. The current market (exchange) price of
SS shares is $8.75.
Tim Mayall is an Australian resident for tax purposes with a
marginal tax rate of 40%. He purchased 1000 shares of SS Inc. at
$6.50 per share in July 2021. He has recently decided to sell 60%
of his SS shares to fund a long overdue holiday. He is trying to
decide whether to sell his shares into the buyback or alternatively
to sell them on the exchange. Using the approach discussed in the
lecture, which of the following statement correctly describes the
net proceeds received by Tim after he sells his shares?
Tim will be better off by $1112 if he sells the shares over the
exchange.
Tim will be better off by $667.2 if he sells the shares over the
exchange.
Tim will be worse off by $1112 if he sells the shares over the
exchange.
None of the other answers is correct.
Tim will be indifferent between selling the shares over the
exchange and into the buyback.