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Textron did not acquire Avdel to serve as a “tax haven
device”.
Discussion
The current issue, before the Court on cross-motions for
partial summary judgment, is one of first impression. It
involves the interaction of the rules relating to CFCs contained
in subpart F (subpart F) of subchapter N (i.e., sections 951
through 963) and the rules relating to grantor trusts contained
in subpart E (subpart E) of subchapter J (i.e., sections 671
through 679). The relevant provisions of subpart F are sections
951(a) and (b) and 958(b). The relevant provisions of subpart E
are sections 671, 672(a) and (b), and 677(a). We set forth the
relevant text of these provisions in an appendix.
Each party asserts that it is entitled to partial summary
judgment on the subject issue. Respondent argues that Textron is
considered the owner of the Avdel shares under subpart E and,
hence, a United States shareholder (U.S. shareholder) under
subpart F whose income includes Avdel’s subpart F income.
Petitioner argues that Textron is not a U.S. shareholder under
subpart F. Petitioner asserts that a taxpayer is a U.S.
shareholder for that purpose only if the taxpayer can vote the
shares of the CFC. Petitioner points out that Textron could not
vote Avdel’s shares and concludes that Textron was not required
to include in its income Avdel’s subpart F income.
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