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The notice of deficiency for withholding tax for 1993
states:
1(a) Deemed Dividend Distributions
It is determined that during the taxable year 1993
deemed dividend distributions were made by you to
Framatome Connectors International (FCI), a French
corporation, in the amount of $54,006,312.00, as
computed below, which are subject to withholding tax as
computed in “5(a).”
Petitioners contend that respondent’s use of the phrase
“deemed dividend distributions” establishes that Burndy-US did
not actually distribute dividends to FCI. We disagree. Burndy-
US actually distributed the constructive dividends in these cases
to FCI in 1993 because FCI received excess value from Burndy-US
in 1993. Petitioners’ position assumes that only non-
constructive dividends are distributed. We disagree. A
dividend, deemed or constructive, is distributed when the
shareholder receives excess value from the corporation as
occurred here.
The parties stipulated that Burndy-US sold all of the stock
of its European subsidiaries to FCI. Petitioners contend that
the stipulation prevents us from concluding that Burndy-US sold
only some of the stock and that the rest were dividends. We
disagree. We do not construe the stipulation to bar our
consideration of respondent’s theory that Burndy-US paid
constructive dividends to FCI.
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