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formed for a significant purpose of reducing taxes, it does not
necessarily follow that respondent abused her discretion by
failing to exclude the income at issue of B&L Hong Kong from the
sale of B&L products it did not assemble and from interest from
petitioners' gross income for their taxable years ended December
25, 1983, through December 28, 1986. In any event, the instant
record does not support a finding that respondent abused her
discretion by failing to determine that reduction of taxes was
not a significant purpose for effecting the transactions that
gave rise to that income.
We initially note that petitioners reported certain of B&L
Hong Kong's income from sources other than the sale of sunglasses
assembled by it as subpart F income for each of their taxable
years ended December 30, 1984, through December 28, 1986.
Although petitioners did not report subpart F income from B&L
Hong Kong for their taxable year ended December 25, 1983, a
memorandum prepared by B&L in connection with the tax audit of
petitioners' taxable years ended December 25, 1983, and December
30, 1984, indicated that petitioners did not report any such
income for their taxable year ended December 25, 1983, because
B&L Hong Kong "generated an overall loss from Subpart F opera-
tions" for that year. Petitioners did not assert that any por-
tion of B&L Hong Kong's income at issue from the sale of B&L
products it did not assemble and from interest was excludible
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