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specifically, as relevant to the instant proceeding, respondent
adjusted petitioners’ income to include 50 percent of alleged
subpart F income received by Carolco Investments B.V. (CIBV), a
Netherlands entity, on the grounds that CIBV was a controlled
foreign corporation in which petitioners owned 50 percent of the
stock. The remaining 50 percent was allocated to Mario F.
Kassar, petitioner in a related case at docket No. 5195-96. This
position was maintained in respondent’s original answer.
Respondent now seeks in paragraph 7 of the amended answer to
attribute to petitioners 100 percent of CIBV’s purported subpart
F income for 1989, with a corresponding increase in the
deficiency and accuracy-related penalty due for that year.
Respondent’s alleged basis for doing so is the claim that on
December 30, 1989, the 50 percent of CIBV shares formerly owned
by Mr. Kassar was transferred to Trust-en Administratiekantoor
Nestor B.V. (Nestor), another Netherlands corporation, which
respondent avers was owned or controlled by petitioners.
At the hearing held on November 15, 2000, counsel for
petitioners represented that his clients objected to respondent’s
proposed amended answer only with respect to the allegations set
forth in paragraph 7 thereof. Hence, there is no barrier to our
granting respondent’s motion in so far as it relates to items
other than those detailed in paragraph 7. As regards paragraph
7, we conclude, for the reasons explained below, that
respondent’s motion should be granted on this point as well.
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