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pertained only to the section 936 issue. The cross-motions before
us concern only the section 936 issue, and not the FSC issue.
On the same date that the restricted consents were executed,
respondent issued a "30-day letter" and a revenue agent report
(RAR) that followed the adjustments in the NOPA. The RAR made no
reference to the recalculation of the combined taxable income. The
RAR stated that "The Service is challenging this profit split
deduction because the activities in the Puerto Rico facility do not
meet the definition of manufacturing as required in IRC 954."
Notices of Deficiency
On May 9, 1996, respondent issued two notices of deficiency,
one for petitioner's 1987, 1988, and 1989 tax years and the other
for petitioner's 1991 tax year. A notice was not issued with
respect to petitioner's 1990 tax year because respondent's
adjustments left petitioner in an overpayment position for that
year. However, the 1987, 1988, and 1989 tax year deficiencies
relate to excess business and foreign tax credits that arose in
1990. See sec. 6501(h).
In the notice of deficiency for the 1991 tax year (the notice
before us), respondent determined an $8,810,992 deficiency. The
1991 deficiency arose, in part, because of respondent's
disallowance of petitioner's claimed combined taxable income
deduction as computed under MS-Puerto Rico's election of the
profit-split method. The notice of deficiency stated:
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