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not consider the fact that Burndy-US and Burndy-Japan did not
file consolidated financial statements because petitioners’
expert, Michael Underwood (Underwood), testified (and respondent
does not dispute) that ARB 51 requires consolidation of a parent
and a subsidiary only if the parent owns a majority of the voting
shares of the subsidiary.
Underwood also testified that, based on Furukawa’s and
Sumitomo’s veto powers, it is reasonable to conclude that Burndy-
US had less control over Burndy-Japan than an owner would have
over a subsidiary if the owner owned a majority of voting shares
of the subsidiary. Underwood’s testimony on this point supports
the conclusion that Burndy-US did not control Burndy-Japan for
tax purposes before 1993.
f. Possibility of Undisclosed Agreements
Petitioners contend that Furukawa and Sumitomo agreed to
give control of Burndy-Japan to Burndy-US in 1973 but did not
want any documents reviewed by MITI to so state because that
would have caused MITI to disapprove the transaction. The
documents in our record did not give Burndy-US control over
Burndy-Japan. The 1973 basic agreement stated that it was the
entire agreement of the Burndy-Japan shareholders and that it
superseded all previous agreements regarding matters in the 1973
basic agreement. We conclude that Furukawa and Sumitomo did not
agree to give Burndy-US control over Burndy-Japan in 1973.
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