Inc. (Framatome US), now known as Framatome Connectors USA Holding, Inc., to Framatome Connectors International (FCI), their parent corporation, of assets worth more than the assets that Burndy-US received from FCI were constructive dividends subject to withholding tax under section 1442. We hold that they were to the extent described below.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
A. Petitioners, Their Predecessors, Furukawa, and Sumitomo1. The Framatome Companies
Petitioner FramatomeUS is a New York corporation, the principal place of business of which was in Connecticut when the petitions were filed. Framatome S.A., a French company, owned 100 percent of FCI, another French company, which owned 100 percent of Framatome US during the years in issue.
Framatome S.A. designed, sold, built, and serviced nuclear power units. Framatome S.A. decided to diversify. Around 1988, Framatome S.A. formed FCI to acquire and hold businesses which manufactured electrical and electronic*35 *6 connectors. Electric utility companies use electrical connectors to connect cables or wires. Manufacturers use electronic connectors in machines, appliances, computers, and electronic products. FCI formed Framatome US in 1988 to acquire all of the outstanding shares of Burndy-US (described next) and its subsidiaries, which manufactured electrical and electronic connectors.
2. Burndy-US
Burndy-US was a predecessor corporation of Framatome US and Framatome Connectors USA Holding, Inc.Burndy-US manufactured electrical and electronic connectors before 1989.
Key Burndy-US officers and employees included Richard Farley (Farley), president of Burndy-US in 1972 and board member until 1989; Ernest Fanwick (Fanwick), general counsel of Burndy-US in 1970 and later vice president, general counsel, and secretary of Burndy-US until 1989; Michael Cantor (Cantor), a general consultant for Burndy-US in Japan from 1963 to 1980; and Theodore York (York), a Burndy-US employee from 1964 to 1994, the general manager of one of Burndy-US's domestic electrical businesses in 1980, later manager of several Burndy-US overseas subsidiaries, and a director of Burndy- Japan (described below at page 8).
Burndy-US*7 owned all of the stock of the following European subsidiaries before 1989: Framatome Connectors Belgium N.V. (FC- Belgium); Framatome Connectors Schweiz A.G. (FC-Switzerland); Framatome Connectors Espana (FC-Spain); Framatome Connectors Italia (FC-Italy); Framatome Connectors Deutschland GmbH (FC-Germany); Framatome Connectors U. K. Ltd. (FC-United Kingdom); Framatome Connectors Nederland B. V. (FC-Netherlands); and Framatome Connectors Sweden A. B. (FC-Sweden).
In the late 1980s, FCI acquired several connector companies in addition to Burndy-US. Burndy-US and Framatome US merged in 1989. 2 After being acquired by FCI, Burndy-US and other FCI subsidiaries continued to manufacture electrical and electronic connectors.
*36 Burndy-US's sales were $ 300 to $ 350 million per year in the years in issue.
3. Furukawa and Sumitomo
During the years in issue, Sumitomo Electric*8 Industries, Ltd. (Sumitomo), and Furukawa Electric Co., Ltd. (Furukawa), manufactured electrical wires, cables, and connectors for Japanese electric utility companies. They competed against each other. They were among the largest cable manufacturers in Japan. Sumitomo had annual sales of $ 5 to $ 8 billion in the years in issue. Furukawa's sales were slightly less.
B.