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the rates published by the Pacific Exchange Rate Service;
(d) Burndy-US paid for FCI’s loss that resulted from the decrease
in the cost of yen (in French francs) after FCI bought yen which
it used to buy 40 percent of Burndy-Japan stock and before FCI
paid the yen to Furukawa and Sumitomo; and (e) Burndy-US
transferred value to FCI by paying FCI $6 million for a covenant
not to compete that benefited FCI and its subsidiaries.
Respondent contends that each of these methods was a separate
mechanism by which Burndy-US transferred excess value to FCI. We
discuss each of these contentions next.
a. Transfer of European Subsidiaries and Cash by
Burndy-US to FCI in Exchange for 40 Percent of
Burndy-Japan Stock
Burndy-US transferred to FCI the stock of FC-Belgium and FC-
Switzerland in 1993 and the stock of FC-Spain and FC-Italy in
1994. Respondent contends that the value of those subsidiaries
in 1993 was $17,577,252 more than the value of the 40-percent
interest in Burndy-Japan that FCI transferred to Burndy-US.
Respondent relies on the fact that Burndy-US reported on its 1993
income tax return that the fair market value of 40 percent of
Burndy-Japan was $53,050,302 and the fact that the parties
stipulated that the fair market value of those subsidiaries was
$17,577,252 more than $53,050,302.
Petitioners contend that Burndy-US did not transfer excess
value to FCI in 1993 when Burndy-US transferred the stock of its
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