Charles L. Fields and Barbara S. Fields - Page 8

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          petitioner and Dr. Young would render valuable management and               
          consulting services to the foreign corporation as corporate                 
          employees, and that these services would result in substantial              
          revenue.  Finley Kumble anticipated that the corporation would              
          distribute the revenue to Dr. Young and petitioner in the form of           
          salaries over several years.  Finley Kumble believed that,                  
          although the corporation would most likely be a "controlled                 
          foreign corporation" and a "foreign personal holding company", a            
          careful structuring of the arrangement would allow petitioner and           
          Dr. Young to escape the U.S. tax until they actually received               
          their salary payments.  Finley Kumble believed that the                     
          arrangement was subject to attack by the Commissioner under                 
          section 367 or 482, or by arguing doctrines such as:                        
          (1) Substance over form, (2) sham transaction, (3) assignment of            
          income, or (4) deductibility of compensation.  Finley Kumble                
          relayed these understandings, anticipations, and beliefs to                 
          petitioner and Dr. Young.  Petitioner and Dr. Young chose to                
          organize the foreign corporation.                                           
               Finley Kumble, on behalf of petitioner and Dr. Young,                  
          contacted Max Quin (Mr. Quin), an attorney with a Bermuda law               
          firm named Vaucrosson's, to organize the corporation because it             
          was customary to use Bermudan counsel to organize a Bermudan                
          corporation.  On or about April 10, 1980, Mr. Quin organized the            
          corporation for petitioner and Dr. Young under the name of                  






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