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setting of Frank v. International Canadian Corp., supra, with its
own findings and conclusions based on the record before it, as
follows (304 F. Supp. at 643):
Clear from a reading of the Frank rationale and holding is
that the subsidiary there took over business previously
performed by the parent. The parent transferred its selling
operations to the subsidiary. The court further found there
that the subsidiary was not “inactive”:
“The facts also show clearly that International earned
its income by performing services. International
resolved shipping problems with Alaska Pine; it handled
all the export declarations and customs papers; it
incurred and paid $124,814.72 in freight charges; it
was studying the possibility of expanding its business
in Canada. In the words of the district court:
“* * * in entire good faith International was
organized as a corporation and at all times
operated as a bona fide separate entity engaged in
substantial and legitimate business activities
from which its gross income was derived.” (308
F.2d at 527)
In its dealings with the affiliate mining companies
Export performed no services; resolved no problems; incurred
no freight charges; and engaged in no genuine business
activities.
I therefore find and conclude that the portion of its
income derived from the purchase of crude gypsum from its
sister companies and the resale to its parent was not income
derived from the active conduct of a trade or business
within the meaning of section 921 (26 U.S.C. �921). I
further find and conclude that for this reason Export did
not qualify as a Western Hemisphere Trade Corporation and
was not entitled to claim the benefits of the special
deductions under the Act.
Thus, the opinion in United States Gypsum Co. v. United
States, supra, was not thought by the District Court as being
“contrary” to the rationale of Frank v. International Canadian
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