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Kong's interest income at issue.45
With respect to B&L Hong Kong's income at issue from the
sale of B&L products it did not assemble, petitioners argue that
the factors set forth in section 1.954-1(b)(3)(iv), Income Tax
Regs., show that the transactions that gave rise to that income
were not effected for a significant purpose of reducing taxes.
We disagree. We have examined all of the facts and circumstances
disclosed by the record with respect to that income and find that
petitioners have failed to show that respondent abused her dis-
cretion by failing to determine that the transactions that gave
rise to B&L Hong Kong's income at issue from the sale of B&L
products it did not assemble were not effected for a significant
purpose of reducing taxes.
Although the testimony of current and former B&L employees
(viz., Mr. Chan and John Vay) establishes that tax avoidance was
not a significant purpose for the formation of B&L Hong Kong, the
record is silent, particularly with respect to petitioners'
taxable years ended December 25, 1983, through December 28, 1986,
45 Petitioners argue that B&L Hong Kong's interest income at
issue is excludible from their gross income pursuant to sec.
954(b)(3)(A). The record does not establish the total amount of
B&L Hong Kong's foreign base company income (determined without
regard to sec. 954(b)(2) and (5)) for any of the taxable years
ended Dec. 25, 1983, through Dec. 28, 1986. Consequently, we are
unable to determine whether B&L Hong Kong's interest income (or
any other foreign base company income that we have found herein)
is excludible pursuant to sec. 954(b)(3)(A).
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