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Petitioners direct our attention primarily to the following
WHTC opinions: Frank v. International Canadian Corp., 308 F.2d
520 (9th Cir. 1962); Babson Brothers Export Co. v. Commissioner,
T.C. Memo. 1963-144. Respondent contends that “Cases arising
under * * * [the WHTC provisions] are not applicable to a section
936 issue” (a contention we reject), and urges us to focus on
“the contrary holding in another section 921 case, United States
Gypsum Company v. United States”, 304 F. Supp. 627 (N.D. Ill.
1969), affd. in part and revd. in part 452 F.2d 445 (7th Cir.
1971).
Frank v. International Canadian Corp., supra, involved the
following situation. A, a U.S. corporation, owned B, also a U.S.
corporation. B produced liquid chlorine and liquid caustic soda,
which it sold to C, a Canadian corporation. For what the
District Court found and what the Court of Appeals accepted were
“good business reasons” (id. at 526), B created D to handle sales
to C. Thereafter, B sold its products to D, which then sold them
to C. The Commissioner determined that D did not qualify as a
WHTC. After losing across-the-board in a refund suit in the
District Court, the Commissioner contended on appeal that D did
not qualify as a WHTC because it did not derive the requisite
gross income “‘from the active conduct of a trade or business’
within the meaning of section 109(b) of the Internal Revenue Code
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