Bausch & Lomb Incorporated and Consolidated Subsidiaries - Page 2

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                         Dec. 29, 1985         5,417,150                              
                         Dec. 28, 1986         6,529,257                              
                         Dec. 27, 1987         5,339,670                              
               The following issues remain for decision:1                             
               (1)  Does the income for each of the years at issue from the           
          sale of sunglasses assembled2 by Bausch & Lomb Ireland, Ltd. (B&L           
          Ireland) and by Bausch & Lomb Hong Kong, Ltd. (B&L Hong Kong)               
          constitute foreign base company sales income as defined in                  
          section 954(d)(1) that is includible in petitioners' gross income           
          under section 951(a)(1)?  We hold that it does not.                         
               (2)  Did respondent abuse her discretion under section                 
          954(b)(4) by failing to exclude certain income of B&L Hong Kong             
          from sources other than the sale of sunglasses it assembled3 from           
          petitioners' gross income for their taxable years                           





          1  Prior to the trial herein, the Court granted the parties'                
          joint motion to sever a capital loss carryback issue relating to,           
          inter alia, petitioners' taxable year ended Dec. 27, 1987.  Since           
          that year is one of the years at issue in docket No. 1215-92, no            
          decision may be entered in that case at the present time.                   
          2  Unless otherwise indicated, our use herein of the words "as-             
          sembled", "produced", "manufactured", and similar words does not            
          reflect the Court's view as to whether the sunglasses assembled             
          by Bausch & Lomb Ireland, Ltd. and by Bausch & Lomb Hong Kong,              
          Ltd. were manufactured by each of those companies for purposes of           
          sec. 954(d)(1).                                                             
            All section references are to the Internal Revenue Code (Code)            
          in effect for the years at issue.  All Rule references are to the           
          Tax Court Rules of Practice and Procedure.                                  
          3  Not all of B&L Hong Kong's income from sources other than the            
          sale of sunglasses it assembled is at issue herein.  See discus-            
          sion infra.                                                                 


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