The Limited, Inc., and Consolidated Subsidiaries - Page 37

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          transferred the $174.9 million received from MFE N.V. to Limited            
          Services to reduce the balance outstanding under a line of credit           
          extended to WFNNB by Limited Services.                                      
               WFNNB is a wholly owned subsidiary of petitioner, and,                 
          therefore, the reduction of WFNNB’s line of credit balance to               
          Limited Service directly benefited petitioner.  As we shall                 
          explain in the next section of this report, we find that                    
          respondent did not abuse his discretion in attributing the MFE              
          N.V. CDs to MFE.  We therefore view the purchase of the MFE N.V.            
          CDs as a repatriation of the earnings of MFE.  Because that                 
          repatriation made the earnings of MFE (a controlled foreign                 
          corporation) available for use by its only U.S. shareholder                 
          (petitioner), we find that the repatriation was substantially the           
          equivalent of a dividend being paid by MFE to petitioner.  The              
          purchase of the MFE N.V. CDs was an investment in U.S. property.            
          The exception for section 956 deposits is unavailable.                      
               F.  Section 1.956-1T(b)(4), Temporary Income Tax Regs.                 
               Section 1.956-1T(b)(4), Temporary Income Tax Regs., 53 Fed.            
          Reg. 22165 (June 14, 1988), empowers respondent to attribute to             
          MFE the MFE N.V. CDs if one of the principal purposes for                   
          creating, organizing, or funding MFE N.V. was to avoid the                  
          application of section 956 with respect to MFE.                             
               Petitioner argues that the purpose of organizing MFE N.V.              
          was to inject an additional corporate layer between MFE and the             

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