The Limited, Inc., and Consolidated Subsidiaries - Page 28

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          Reform Act of 1976, Congress added subparagraph (F) to section              
          956(b)(2).10  Subparagraph (F) of section 956(b)(2) provides that           
          U.S. property does not include stock or debt of a domestic                  
          corporation (unless the corporation is itself a U.S. shareholder            
          of the foreign controlled corporation) if the U.S. shareholders             
          of the controlled foreign corporation have less than 25-percent             
          control of the domestic corporation.                                        
               E.  Analysis                                                           
                    1.  The Banking Business                                          
               The repatriation provision was enacted in 1962 on the theory           
          that the repatriation of previously untaxed (by the United                  
          States) earnings by a controlled foreign corporation was                    
          substantially the equivalent of a dividend being paid to the U.S.           
          shareholders of that corporation (dividend equivalency theory).             
          Excepted were a group of transactions that the tax writing                  
          committees believed were “normal commercial transactions without            
          intention to permit funds to remain in the United States                    
          indefinitely”.  S. Rept. 1881, supra, 1962-3 C.B. at 794; accord            
          H. Rept. 1447, supra, 1962-3 C.B. at 469.  One such exception is            
          for “deposits with persons carrying on the banking business”.               
          The phrase “carrying on the banking business” is a phrase                   

          10   Congress also added subparagraph (G) to sec. 956(b)(2),                
          which deals with certain oil drilling rigs used on the U.S.                 
          continental shelf and is not relevant to our discussion.                    

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