- 47 -
3. Whether Burndy-US Owned More Than 50 Percent of the
Value of Burndy-Japan Stock
A foreign corporation is a CFC if U.S. shareholders own more
than 50 percent of the total value of its stock. Sec. 957(a)(2).
Petitioners contend that Burndy-US owned more than 50 percent of
the value of Burndy-Japan stock in 1992. We disagree.
a. Applicable Legal Standard
Petitioners contend that the value of Burndy-Japan stock
held by Burndy-US shareholders exceeded 50 percent of the total
value of the three blocks of stock held by the shareholders of
Burndy-Japan. Petitioners rely on Mariani Frozen Foods, Inc. v.
Commissioner, 81 T.C. 448, 468-469 (1983), affd. sub nom. Gee
Trust v. Commissioner, 761 F.2d 1410 (9th Cir. 1985). The
taxpayer in Mariani Frozen Foods sought to avoid foreign personal
holding company status by showing that it did not own more than
50 percent of the value of outstanding stock for purposes of
section 552(a)(2).17 We held that the value of foreign
corporation stock held by U.S. shareholders was more than 50
percent of the total value of the blocks of stock held by all
shareholders. Id. at 471. We agree with petitioners that the
standard in Mariani Frozen Foods applies here.
17 In Mariani Frozen Foods, Inc. v. Commissioner, 81 T.C.
448, 469 (1983), affd. sub nom. Gee Trust v. Commissioner, 761
F.2d 1410 (9th Cir. 1985), the taxpayers conceded that they would
lose under a liquidation approach. However, we held against the
taxpayers under a different test without considering the
liquidation approach further.
Page: Previous 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 NextLast modified: May 25, 2011