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OPINION
I. Introduction
World Financial Network National Bank (WFNNB), a national
banking association, is a wholly owned subsidiary of petitioner.
In 1989, WFNNB was organized (and today operates) as a credit
card bank to issue credit cards to customers of petitioner’s
stores. Mast Industries (Far East), Ltd. (MFE), a Hong Kong
corporation, also is a wholly owned subsidiary of petitioner.
MFE is a controlled foreign corporation within the meaning of
section 957 and, with respect to MFE, petitioner is a U.S.
shareholder within the meaning of section 951(b). MFE
(Netherlands Antilles) N.V. (MFE N.V.), a Netherlands Antilles
corporation, is a wholly owned subsidiary of MFE. On January 28,
1993, MFE N.V. purchased eight certificates of deposit (CDs) from
WFNNB in the total amount of $174.9 million (the MFE N.V. CDs).
We must determine whether, as a result of those purchases,
petitioner must include $174,127,665 in gross income under
section 951(a)(1)(B) on account of the investment by MFE of its
earnings in U.S. property.6 See sec. 956.
6 The record does not explain the discrepancy between the
$174.9 million purchase price and the $174,127,665 adjustment to
gross income.
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