The Limited, Inc., and Consolidated Subsidiaries - Page 39

                                       - 39 -                                         

          in WFNNB before MFE N.V. was organized.  Whether MFE N.V. was               
          organized for asset protection purposes we need not say.  We do             
          believe, however, that that was not the sole purpose of                     
          organizing MFE N.V.  We believe that a principal purpose of                 
          organizing and funding MFE N.V. was to avoid having the $174.9              
          million capital contribution result in subpart F income pursuant            
          to section 956.  Further, we believe that another principal                 
          purpose was to limit any subpart F income imposed pursuant to               
          section 956 to MFE N.V.'s earnings and profits, which were                  
          negligible.  Thus, we find that a principal purpose for creating,           
          organizing, and funding MFE N.V. to purchase the MFE N.V. CDs,              
          rather than using a domestic corporation or having MFE purchase             
          the CDs directly, was to avoid the application of section 956.              
          Mr. Lyon's testimony supports that conclusion.  Accordingly, the            
          MFE N.V. CDs are attributed to MFE pursuant to section 1.956-               
          1T(b)(4), Temporary Income Tax Regs., supra.                                
               G.  Conclusions                                                        
               At the close of 1993, MFE held the MFE N.V. CDs.  The MFE              
          N.V. CDs were U.S. property and not section 956 deposits.                   
          V.  Conclusion                                                              
               To the extent respondent determined a deficiency in tax on             
          the basis that petitioner must include $174,127,665 in gross                

Page:  Previous  21  22  23  24  25  26  27  28  29  30  31  32  33  34  35  36  37  38  39  40  Next

Last modified: May 25, 2011