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for distribution in the United States. Nor did either company
sell sunglass parts to retailers except as replacements for
repair work. Neither B&L Inc., B&L Ireland, B&L Hong Kong, nor
anyone else in the sunglass industry sold sunglass parts to the
ultimate consumer.
Tax Return Treatment
For each year at issue, petitioners reported none of the
income of B&L Ireland and of B&L Hong Kong from the sale of
sunglasses they assembled as income under subpart F of the Code
(subpart F).
For each of their taxable years ended December 30, 1984,
December 29, 1985, and December 28, 1986, 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.30 Petit-
ioners did not report any of B&L Hong Kong's income as subpart F
income for its taxable year ended December 25, 1983. A memoran-
dum prepared by B&L in connection with the tax audit of petition-
ers' taxable years ended December 25, 1983, and December 30,
1984, indicated that petitioners did not report any of B&L Hong
Kong's income as subpart F income for their taxable year ended
December 25, 1983, because that company "generated an overall
loss from subpart F operations" for that year.
30 It is not clear from the record what all of the sources of
B&L Hong Kong's reported subpart F income were for those years.
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