The Limited, Inc., and Consolidated Subsidiaries - Page 38

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          deposits to WFNNB “to improve the efficacy of the deposits as               
          protection against expropriation” by the People’s Republic of               
          China, which was scheduled to take over Hong Kong in 1997.  That            
          was the testimony of Kenneth B. Gilman, petitioner’s executive              
          vice president-finance and chief financial officer.  When asked,            
          however, why that was the case, Mr. Gilman replied that he was              
          not exactly sure.  Timothy B. Lyons is and, during the years in             
          issue, was petitioner’s vice president-tax.  His responsibilities           
          include compliance, tax planning, and administration of the tax             
          function at petitioner.  He is intimately familiar with the                 
          business activity of MFE.  Like Mr. Gilman, he also testified               
          that the purpose of forming MFE N.V. was to protect against                 
          expropriation.  Indeed, he testified that it was the “sole”                 
          purpose for organizing MFE N.V.  On cross-examination, Mr. Lyon             
          was asked why no consideration had been given to forming a                  
          domestic (United States) subsidiary of MFE to protect against               
          expropriation.  He responded:  “It didn’t really accomplish                 
          anything from the asset protection side * * * but * * * there is            
          no question it would have been deemed a dividend or something at            
          that point.”14  Further, petitioner decided to invest MFE’s funds           

          14   It is possible that Mr. Lyon's concern related to sec.                 
          956(b)(1)(B), pursuant to which MFE's increase in earnings                  
          invested in the stock of a domestic corporation would have                  
          resulted in subpart F income to petitioner to the extent of such            

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