- 70 -
the assembly of prescription eyeglasses, we generally do not rely
upon those rebuttal reports.
Judicial Interpretations of Relevant Regulations
In Dave Fischbein Manufacturing Co. v. Commissioner, 59 T.C.
338 (1972), petitioner Dave Fischbein Manufacturing Company
(DFMC) manufactured the parts for portable bag-closing machines37
and assembled those parts into portable bag-closing machines. It
also sold some of the parts it manufactured to its wholly owned
subsidiary, Compagnie Fischbein, S.A. (CFSA), a Belgian corpora-
tion. CFSA, in turn, assembled those parts into bag-closing
machines. CFSA did not maintain a sales force, did not design
its own products, and purchased most of the parts used in assem-
bling the bag-closing machines from DFMC.38 Dave Fischbein Manu-
facturing Co. v. Commissioner, supra at 350-351.
Relying on section 1.954-3(a)(4)(iii), Income Tax Regs., we
found on the facts presented in the Dave Fischbein Manufacturing
Co. case that the income generated by CFSA from the sale of the
portable bag-closing machines it assembled did not constitute
37 A bag-closing machine is a type of sewing machine used to
close the mouth of an open bag for products such as animal feed,
seed, fertilizer, and processed food. Dave Fischbein Manufactur-
ing Co. v. Commissioner, 59 T.C. 338, 340 (1972).
38 CFSA also purchased from unrelated suppliers some of the
standard parts used in portable bag-closing machines, such as
screws, nuts, and switches. Dave Fischbein Manufacturing Co. v.
Commissioner, supra at 350.
Page: Previous 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 NextLast modified: May 25, 2011