- 146 -
Year Total Adjustments
MSI 1988 $4,595,445.79
1989 1,044,273.46
MANV/MDT 1987 1,644,863.00
1988 9,142,864.57
1989 1,429,130.80
A substantial portion of the amounts that constituted the total
adjustments listed as items (a) through (g) above was ultimately
paid to the Spanish investors through the various entities
representing them. In contrast, total dividend payments were
approximately as follows:
Year(s) Total Dividends Paid
MTNV 1983-1987 $1,350,006.52
MSI 1987-1991 -0-
MANV 1986-1987 2,500,000.00
MDT 1987-1991 -0-
Petitioners have conceded items (f) and (g); therefore, only
issues (a) through (e) remain for decision.
A. Interest that MDT and MSI Paid to MABV and MTBV,
Respectively
Petitioners argue that the interest paid on the promissory
notes that were exchanged in the section 351 transactions was not
subject to withholding because interest was exempt under a Dutch
Treaty in existence at the time. Petitioners argue that MABV and
MTBV were viable business entities and that the debt owed to them
was bona fide.
Respondent contends that, to the extent the Court finds that
the payments are return of equity and not interest, petitioners
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