Claymont Investments, Inc., As Successor in Interest to New CCI, Inc. and Subsidiaries - Page 3

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          relationships are deductible pursuant to section 165;2 (2)                  
          petitioners’ arm’s-length loan may, pursuant to section 482, be             
          recast as a new loan to reflect the interest rate at the time of            
          the subsequent assumption of the arm’s-length loan; and (3)                 
          petitioners are allowed to defer recognizing foreign exchange               
          gain relating to 1996.                                                      
                                  FINDINGS OF FACT                                    
          I.   The Technicolor Acquisition                                            
               Carlton Communications Plc (Carlton), a United Kingdom (UK)            
          corporation, is the parent company of petitioner, Colorado                  
          Acquisition Corp., and Technicolor Holdings, Ltd. (Holdings).3              
          Petitioner and Colorado Acquisition Corp. are U.S. corporations,            
          and Holdings is a U.K. corporation.  Carlton International Corp.            
          (CIC) and Carlton International Holdings, Inc. (CIHI), are wholly           
          owned U.S. subsidiaries of petitioner.                                      
               On October 7, 1988 (the acquisition date), Colorado                    
          Acquisition Corp. acquired from the Revlon Group, Inc., all the             
          stock of Technicolor Holdings, Inc. (Technicolor).4  The parties            

               2  Unless otherwise indicated, all section references are to           
          the Internal Revenue Code in effect for the years in issue, and             
          all Rule references are to the Tax Court Rules of Practice and              
               3  Holdings was formerly known as Colorado Holdings, Ltd.              
               4  As a result of several internal reorganizations of                  
          Carlton’s domestic subsidiaries during the years in issue,                  
          petitioner acquired the stock of Technicolor.                               

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