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December 30, 1993. Using that rate, the value of FF300,240,285
was $50,909,756 (300,240,285/5.8975) on December 30, 1993. The
difference between the value of FF300,240,285 ($53,050,302) and
the value of those French francs based on the exchange rate
published by the Federal Reserve Bank of New York ($50,909,756)
is $2,140,546.
Petitioners contend that FCI and Burndy-US bargained at
arm’s length and that respondent improperly relied on Burndy-US’s
tax return to show that the Burndy-Japan stock was worth
$53,050,302. We doubt that FCI and Burndy-US bargained at arm’s
length because they were related. We conclude that FCI and
Burndy-US used an inflated exchange rate to transfer excess value
to FCI from Burndy-US in 1993.
We agree with petitioners that the correct valuation date is
December 29, 1993 (not December 30). The exchange rate published
for that date by the Federal Reserve Bank of New York was
FF5.8400 to $1. Thus, on December 29, 1993, FF300,240,285 was
worth $51,411,008 (300,240,285/5.84). The difference between the
value of FF300,240,285 ($53,050,302) and the value of those
French francs based on the published exchange rate for December
29, 1993 ($51,411,008) is $1,639,294.
We agree with petitioners that not all of the $1,639,294 is
excess value for 1993 because Burndy-US did not transfer the
shares of all four subsidiaries in 1993. The values of the
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