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applied to determine the amount of voting power owned
for purposes of section * * * 957, a person’s
proportionate interest in a foreign corporation will
generally be determined with reference to the amount of
voting power in such corporation owned by such person.
However, any arrangement which artificially decreases a
United States person’s proportionate interest will not
be recognized. * * * [Sec. 1.958-1(c)(2), Income Tax
Regs.]
Regulations under section 957 similarly state that in
analyzing CFC status:
Any arrangement to shift formal voting power away from
United States shareholders of a foreign corporation
will not be given effect if in reality voting power is
retained. The mere ownership of stock entitled to vote
does not by itself mean that the shareholder owning
such stock has the voting power of such stock for
purposes of section 957. * * * [Sec. 1.957-1(b)(2),
Income Tax Regs.]
Case law has likewise reiterated in dealing with CFC status
questions that “mere technical compliance with section 957(a)” is
insufficient to exclude taxpayers from its application and that
the “50-percent test of section 957(a) was intended to exclude
from the definition of controlled foreign corporations only those
foreign corporations which are not subject to the dominion and
control of the United States shareholders.” Estate of Weiskopf
v. Commissioner, 64 T.C. 78, 93 (1975), affd. without published
opinion 538 F.2d 317 (2d Cir. 1976); see also Kraus v.
Commissioner, 59 T.C. 681, 692 (1973), affd. 490 F.2d 898 (2d
Cir. 1974); Garlock, Inc. v. Commissioner, 58 T.C. 423, 433
(1972), affd. 489 F.2d 197 (2d Cir. 1973).
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