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Petitioners rely on several cases in which the government
successfully invoked the substance over form doctrine. Koehring
Co. v. United States, 583 F.2d 313 (7th Cir. 1978); Estate of
Weiskopf v. Commissioner, 64 T.C. 78 (1975), affd. per curiam
without published opinion 538 F.2d 317 (2d Cir. 1976); Kraus v.
Commissioner, 59 T.C. 681 (1973), affd. 490 F.2d 898 (2d Cir.
1974); and Garlock Inc. v. Commissioner, 58 T.C. 423 (1972),
affd. 489 F.2d 197, 201 (2d Cir. 1973). In those cases, the
issue was whether a U.S. shareholder or shareholders owning 50
percent or less (specifically, common stock with 45 percent of
the voting power in Koehring, stock with 50 percent of the voting
power in Estate of Weiskopf, and all of the common stock which
had 50 percent of the voting power in Kraus and Garlock) of the
stock of a foreign corporation had more than 50 percent of the
voting power of the corporation for purposes of section
957(a)(1). The theme running through these cases was the
arrangement by the U.S. shareholders to have the foreign
corporation issue a new class of voting preferred stock to
foreign persons so as to avoid or terminate CFC status of the
foreign corporation. The Commissioner contended, and the courts
in those cases held, that the foreign corporation remained a CFC
because in substance the U.S. shareholders retained control of
the corporation, notwithstanding the reduction of their nominal
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