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as to petitioners' purpose for structuring as they did the trans-
actions that gave rise to B&L Hong Kong's income at issue from
the sale of B&L products it did not assemble.
In addition, the type of business carried on by B&L Hong
Kong that gave rise to the income at issue from the sale of B&L
products it did not assemble was a sales business that derived
income from the sale of B&L products that it (1) purchased from
its parent or other related companies, (2) sold for use or con-
sumption outside Hong Kong, and (3) did not manufacture or as-
semble in Hong Kong. Thus, the class of income at issue that B&L
Hong Kong derived from that business was foreign base company
sales income as defined in section 954(d)(1).
Petitioners concede that the tax rates in Hong Kong were
lower than the tax rates in the United States. Moreover, the
record shows that B&L's management was aware of the differences
between the tax rates in Hong Kong and the United States during
and immediately prior to the years at issue and that B&L's man-
agement made efforts during those years to reduce its overall tax
burden.
Although most of B&L Hong Kong's sales activity may have
occurred in Hong Kong, the fact that the income at issue of B&L
Hong Kong from the sale of B&L products it did not assemble was
derived from the sale of those products for use or consumption
outside Hong Kong indicates to us that B&L Hong Kong's customers
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