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or obligation whatsoever that the undersigned now has
or may in the future have the legal right, power, or
capacity to do, exercise, or perform as holder of Four
Hundred and Ninety Nine (499) [or Five Hundred and One
(501) in the proxy to the Mong Family Trust] shares of
the capital stock of Carolco Investments, B.V., a
corporation organized under the laws of The Netherlands
(“CIBV”), held by the undersigned, including voting
said shares, granting or withholding consents,
authorizations or demands with respect thereto, and any
other action that may be taken by the record and
beneficial owner thereof, with power of substitution
and with full power to act for the undersigned in its
name, place and stead, in the same manner, and to the
same extent and effect, that the undersigned might if
it were personally present and acting.
Application of Rule 41 Standard in Light of Law and Facts
A. Presence of Colorable Position
On the basis of the foregoing, we make the following
observations as regards the potential merit of respondent’s
position. The disputed portion of respondent’s amended answer
aims to tax petitioners under subpart F on a greater percentage
of the income received by CIBV. Resolution of such issue, if it
is allowed to be raised, will depend in significant part both on
the status of CIBV as a section 957 CFC and on the ownership of
CIBV for purposes of the section 951 income allocation rules.
Respondent’s revised allegations with respect to these two
elements rest, first, on the claim that Nestor was record owner
of 50 percent of CIBV shares after the buyout and, second, on the
contention that Nestor’s ownership should be attributed to
petitioners in applying both section 957 and section 951(a).
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Last modified: May 25, 2011