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veto powers, supermajority requirements, and the board of
director selection rules prevented Burndy-US from controlling
Burndy-Japan.
Section 1.957-1(b)(1), Income Tax Regs., provides that a
taxpayer satisfies the 50-percent voting power test of section
957(a) if the taxpayer meets one of three requirements, all
related to the power to control, or to exercise the powers of,
the board of directors. Section 1.957-1(b)(1), Income Tax Regs.,
provides:
(b) Percentage of total combined voting
power owned by United States shareholders.--(1)
Meaning of combined voting power. In determining
for purposes of paragraph (a) of this section
whether United States shareholders own the
requisite percentage of total combined voting
power of all classes of stock entitled to vote,
consideration will be given to all the facts and
circumstances of each case. In all cases,
however, United States shareholders of a foreign
corporation will be deemed to own the requisite
percentage of total combined voting power with
respect to such corporation –-
(i) If they have the power to elect,
appoint, or replace a majority of that body
of persons exercising, with respect to such
corporation, the powers ordinarily exercised
by the board of directors of a domestic
corporation;
(ii) If any person or persons elected or
designated by such shareholders have the power,
where such shareholders have the power to elect
exactly one-half of the members of such governing
body of such foreign corporation, either to cast a
vote deciding an evenly divided vote of such body
or, for the duration of any deadlock which may
arise, to exercise the powers ordinarily exercised
by such governing body; or
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