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ASAT, Ltd., since Worltek replaced ASAT, Ltd., as majority
shareholder in petitioner.14
ASAT, Ltd., did not sell its stock in petitioner to Worltek;
rather, after the year in issue petitioner issued stock to
Worltek, which diluted the interest of ASAT, Ltd., in petitioner
from 100 percent to 5 percent. Respondent correctly points out
that one of the purposes of section 6038A is to allow the IRS to
obtain the records of a foreign related party's transactions with
a domestic corporation through the issuance of a summons. See S.
Comm. Prt. 101-57, at 112 (1989). Therefore, "successor in
interest" must be interpreted in that light. For section 6038A
to accomplish its purpose, the IRS must be able to compel
production of records from the party that has possession of, or
controls the records of, the related party's transactions. In
this case, the records sought are ASAT, Ltd.'s, a foreign related
party, not Worltek's. Worltek succeeded to nothing of ASAT,
Ltd.'s. We conclude that Worltek is not a successor in interest
14 Sec. 1.6038A-5(e), Income Tax Regs., provides that "A
successor in interest" to a related party must authorize the
reporting corporation to act as agent. Petitioner argues that
since Worltek is a domestic corporation, it cannot be required to
comply with sec. 1.6038A-5(b), Income Tax Regs., which provides
that "Upon request by the Service, a foreign related party shall
authorize as its agent (solely for purposes of sections 7602,
7603, and 7604) the reporting corporation with which it engages
in transactions." (Emphasis added.) The latter provision
however, does not define "successor in interest". We shall,
nevertheless, address the issue of whether Worltek is a successor
in interest to ASAT, Ltd., and thus would be the proper party to
execute the authorization of agent.
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