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because the facts and circumstances indicated that at all times
the corporation had effective control over the subsidiary).
Petitioner contends that the activities of ADCS-Limited and
of ADCS-Korea should be attributed to it and that it therefore
should not be treated as a mere holding company.
Respondent argues that petitioner did not engage in business
activities of its own, that petitioner merely collected income
from its affiliated entities whose activities should not be
attributed to petitioner, and that petitioner should be regarded
as a mere holding company.
Respondent argues further that section 1.537-3(b), Income
Tax Regs., should not be applied to attribute to petitioner the
business activities of ADCS-Limited because petitioner’s
ownership interest in ADCS-Limited was tiered rather than direct,
and because section 1.537-3(b), Income Tax Regs., according to
respondent, applies only to controlled corporate subsidiaries and
not to controlled partnerships. As a reason for not allowing the
activities of ADCS-Limited and of ADCS-Korea to be attributed to
petitioner, respondent cites to Commissioner v. Natl. Alfalfa
Dehydrating & Milling Co., 417 U.S. 134, 149 (1974), and to the
general rule that taxpayers are held to the form of their
transactions.
Petitioner counters with the argument that the clear intent
and effect of section 1.537-3(b), Income Tax Regs., is that
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