- 3 -
B. Japanese Ministry of International Trade and
Industry .................... . 7
C. Burndy-Japan .................. . 8
1. Formation ................. . 8
2. Agreements Between Burndy-US, Furukawa, and
Sumitomo From 1962 to 1973 .......... 9
3. 1973 Basic Agreement ............ 10
4. Burndy-Japan’s Presidents and Board of
Directors ................. 12
5. 1988 Technical Assistance Agreement .... 13
6. Burndy-Japan’s Independence From Burndy-US . 14
7. Burndy-US’s Purchase of 40 Percent of the
Stock of Burndy-Japan in 1993 ....... 15
D. Withholding Tax Issue .............. 17
1. Purchase of TRW Daut & Reitz by Burndy-US . 17
2. Transfer of 40 Percent of Burndy-Japan Stock
to Burndy-US in 1993 ............ 19
OPINION .......................... 20
A. Whether Burndy-Japan Was a Controlled Foreign
Corporation in 1992 ............... 20
1. Voting Power Test and Stock Value Test .. 20
2. Whether Burndy-US Owned More Than 50 Percent
of the Total Combined Voting Power of the
Stock of Burndy-Japan . . . . . . . . . . . 22
3. Whether Burndy-US Owned More Than 50 Percent
of the Value of Burndy-Japan Stock ..... 47
B. Whether Petitioners Are Liable for
Withholding Tax ................. 52
1. Contentions of the Parties ......... 52
2. Whether Burndy-US Transferred Excess Value
to FCI in 1993 ............... 53
3. The U.S.-France Tax Treaty and
1988 Protocol ............... 64
4. Conclusion ................. 67
COLVIN, Judge: Respondent determined deficiencies in
petitioners’ income and withholding taxes and a penalty as
follows:
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