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states that “a surviving corporation carries with it all those
characteristics which the merged corporation had prior to the
merger * * * [including] the attribute of a predecessor
corporation having engaged in a trade or business with respect to
the use of its assets”, even though that is not an item
specifically listed in section 381(c) as carrying over to the
surviving corporation. Accordingly, the IRS ruled that the
amounts treated as section 356(a)(2) dividends paid to F1 out of
the earnings and profits of a party to the Newco II amalgamation
which were accumulated when that party (1) was a related person
to F1 within the meaning of section 954(d)(3), (2) had been
created or organized under the same foreign country laws as F1,
and (3) had a “substantial part” of the assets used in its trade
or business located in such foreign country would not be
includable in FPHCI of F1 for purposes of section 954, by reason
of section 954(c)(4)(A) (now section 954(c)(3)(A)(i)), the so-
called same country exception to the treatment, as FPHCI, of
related party dividends or interest. In other words, the IRS
found that Newco II inherited from former operating subsidiaries
of F1 collapsed into it in a transaction subject to section 381
the attribute of being “engaged in a trade or business with
respect to the use of * * * [those subsidiaries’] assets”.
Therefore, a portion of the Newco II dividend to F1 arising out
of F1's receipt of the Newco I debentures (which become Newco II
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