International Multifoods Corporation and Affiliated Companies - Page 6

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          Federal income tax return for the taxable year ended February 29,           
               Petitioner and Damca owned 100 percent of the outstanding              
          stock of Multifoods Alimentos, Ltda. (MAL).  On February 22,                
          1979, MAL acquired 85 percent of the outstanding stock of Paty.             
          MAL and Paty were Brazilian "limitadas" organized under the laws            
          of the Federal Republic of Brazil.                                          
               Paty was a regional pasta manufacturer, which marketed its             
          products in the greater Rio de Janeiro area.  Petitioner acquired           
          an indirect interest in Paty, because it believed Paty would be a           
          profitable investment.  Through that investment, petitioner                 
          sought to expand its presence in Latin America and provide its              
          stock with more appeal to the stockholding community.                       
               By February 1982, petitioner and MAL had acquired the                  
          remaining 15 percent of the stock outstanding in Paty.  On                  
          February 29, 1984, the Paty stock which MAL held was distributed            
          to petitioner and Damca upon MAL's liquidation.  During its                 
          fiscal year 1986, petitioner transferred all but one share of its           
          Paty stock to Damca.                                                        
               Pursuant to a Quota Purchase Agreement,3 entered into on               
          March 30, 1987, petitioner and Damca sold their stock in Paty to            
          Borden, Inc., and its Panamanian subsidiary Borden S.A.  Borden,            
          Inc., acquired one share of Paty stock, and Borden S.A., acquired           

               3A share of stock in a Brazilian limitada is called a                  

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