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Burndy-US first claimed Burndy-Japan as a CFC on its 1987
return. Burndy-US and Burndy-Japan prepared consolidated
financial statements beginning in September 1993 and thereafter.
D. Withholding Tax Issue
1. Purchase of TRW Daut & Reitz by Burndy-US
In 1992, TRW, Inc. (TRW), a large U.S. multinational
company, manufactured automotive components. TRW had a U.S.
subsidiary, two German affiliates, and one Austrian affiliate
(collectively, TRW Daut & Reitz). The U.S. subsidiary
manufactured and sold automotive electronic connectors for the
U.S. market. The German and Austrian affiliates did so for the
German market.
TRW sold TRW Daut & Reitz in 1992 to help finance its
expansion into the air bag business. FCI paid TRW $67,201,317
for TRW Daut & Reitz. TRW owned patents and had two U.S. patent
applications related to air bag connectors pending in 1992. FCI
wanted to buy the rights to those patents to prevent TRW from
competing with FCI. TRW agreed to license the use of its
patents. TRW also agreed not to compete in the air bag market.
One noncompetition agreement covered the United States and
Europe. The second covered Germany, and the third covered
Austria.
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