Vickie Lau, a citizen and resident of Hong Kong, purchased 1,000 shares in Amazing Technologies Inc., a California corporation, for $1.56 per share way back in 1994. Over the years, Amazing Technologies has become the #1 technology company in the world. It was able to do this, in part, by reinvesting profits into new technologies and never paying a dividend. As a result, Amazing Technologies has over $100 billion in cash and its stock is worth $265 per share.

In 2022, to reward investors, Amazing Technologies declared its first ever dividend of $10 per share to be paid to investors. Vickie is excited to be receiving $10,000 in dividends. However, she gets a notice that she will receive only $7,000 in cash, and $3,000 will be withheld and paid to the IRS as a U.S. withholding tax. She checks with her accountant who confirms that this is correct. Vickie is not happy.

After talking to her personal banker in the US, she suggests that Vickie enter into a contract with Big Bank Inc. that will pay her, at the end of the year, any upside and any dividend amounts paid on Amazing Technologies stock, while Vickie has to pay a financing rate of 3% on a notional amount of $265,000 and any downside in Amazing Technologies stock. As part of the deal, Vickie will sell her stock to Big Bank during the term of the contract, and rebuy the stock at the end of the contract. Her banker tells Vickie that the contract will be able to pay her the $10,000 dividend equivalent amount without any U.S. withholding taxes since it is not an actual dividend payment.

She checks with her accountant again, who tells her that not only is the deal a bad financial decision, the plan will not work and she will still have $3,000 withheld and paid to the IRS as a U.S. withholding tax.

Hong Kong and the United States don't have a tax treaty.

Vickie comes to you for advice. Who is right, her banker or her accountant? Explain.