decide:
1. Whether Burndy-Japan Ltd. (Burndy-Japan) was a
controlled foreign corporation (CFC) of Burndy Corp. (Burndy-US)1
in 1992. We hold that it was not because Burndy-US did not own
more than 50 percent of the voting power of Burndy-Japan stock or
more than 50 percent of the value of Burndy-Japan stock in 1992.
2. Whether transfers from Burndy-US and Framatome
Connectors USA, 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.
References to Burndy Corp. (Burndy-US) include its successors in interest, such as Framatome Connectors USA, Inc., and Framatome Connectors USA Holding, Inc. - 5 -
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
A. Petitioners, Their Predecessors, Furukawa, and Sumitomo
1. The Framatome Companies
Petitioner Framatome US 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 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. - 6 -
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 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
Framatome US changed its