- 51 -
profits. We disagree. Burndy-US, Furukawa, and Sumitomo
negotiated the amount of the royalties, commissions, and profit
distributions at arm’s length. Generally, no disproportionate
benefit results from an arm’s-length negotiation. United States
v. Davis, 370 U.S. 65, 72 (1962) (the value of two properties
exchanged in an arm’s-length transaction is presumed to be
equal); Elmhurst Cemetery Co. v. Commissioner, 300 U.S. 37, 39
(1937) (the value assigned to property by a buyer and seller
dealing at arm’s length is persuasive evidence of its fair market
value); S. Natural Gas Co. v. United States, 188 Ct. Cl. 302, 412
F.2d 1222, 1252 (1969) (the price of property sold in an arm’s-
length transaction is presumed to be its fair market value).
Petitioners point out that in United States v. Parker, 376
F.2d 402 (5th Cir. 1967), the U.S. Court of Appeals for the Fifth
Circuit held that a taxpayer who owned 80 percent of the
outstanding stock of a corporation owned more than 80 percent of
the value of the stock of that corporation. Here, the veto
provisions, supermajority requirements, and rules for electing
directors increased the value of the Burndy-Japan stock held by
Furukawa and Sumitomo relative to the value of the stock held by
Burndy-US and decreased the value of the Burndy-Japan stock held
by Burndy-US relative to the value of the stock held by Furukawa
and Sumitomo. See Alumax, Inc. v. Commissioner, 165 F.3d at 825.
Page: Previous 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 NextLast modified: May 25, 2011