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Commissioner, 232 F.2d 873, 877 (4th Cir. 1956), affg. 24 T.C.
1000 (1955); Norwest Corp. v. Commissioner, 111 T.C. 105, 140-147
(1998); Estate of Durkin v. Commissioner, 99 T.C. 561, 572
(1992). As the U.S. Court of Appeals for the Second Circuit (the
court to which these cases are appealable) stated:
It would be quite intolerable to pyramid the existing
complexities of tax law by a rule that the tax shall be
that resulting from the form of transaction taxpayers
have chosen or from any other form they might have
chosen, whichever is less. [Television Indus., Inc. v.
Commissioner, supra at 325.]
Petitioners made inconsistent claims concerning Burndy-
Japan’s CFC status. Before 1987, Burndy-US owned 50 percent of
the stock of Burndy-Japan but it did not treat Burndy-Japan as a
CFC. Burndy-US first claimed Burndy-Japan as a CFC on its 1987
return. Petitioners changed their position even though Burndy-US
continued to own 50 percent of the stock of Burndy-Japan from
1987 to 1992, and the operational relationship between Burndy-US
and Burndy-Japan did not change during those years; the only
change was the tax law. See Tax Reform Act of 1986 (TRA 1986),
Pub. L. 99-514, sec. 631, 100 Stat. 2269.11
11 Petitioners’ new position in 1987 that Burndy-Japan was
a CFC of Burndy-US coincided with a change in the tax law
effective for tax years beginning in 1987. See sec. 1204 of the
Tax Reform Act of 1986 (TRA 1986), Pub. L. 99-514, 100 Stat.
2532. Petitioners do not explain why they began to contend
Burndy-Japan was a CFC in 1987; however, it is obvious that their
purpose was to enable Burndy-US to increase its foreign tax
credit and pay less U.S. tax.
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