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foreign base company sales income as defined in section 954(d)(1)
because the assembly operations conducted by CFSA were substan-
tial in nature and were generally considered to constitute the
manufacture of property within the meaning of that regulation.
Id. at 359. The facts on which we relied in reaching those
conclusions included the following:
CFSA (a) tailors and finishes some of its purchased
components in order to place these parts in usable
condition; (b) puts these tailored components and
others together in a 6-hour, 58-step process to form
salable, quality bag-closing machines; and (c) posses-
ses in its plant all of the tools and equipment neces-
sary for these activities. As a result of CFSA's
operations, the purchaser of one of these devices is
guaranteed a carefully put together, well tested, and
operable machine.
* * * * * * *
It was the caliber of CFSA's mechanics which resulted
in a smooth-running operation rather than a lack of
complexity of the operations. [Id. at 360.]
Except for Dave Fischbein Manufacturing Co. v. Commissioner,
supra, no court has had occasion to consider and apply the facts
and circumstances test of section 1.954-3(a)(4)(iii), Income Tax
Regs. However, on two separate occasions, we considered and
applied certain language in section 1.993-3(c)(2)(iii), Income
Tax Regs., that is similar to the language prescribing the facts
and circumstances test of section 1.954-3(a)(4)(iii), Income Tax
Regs. Garnac Grain Co. v. Commissioner, 95 T.C. 7 (1990); Webb
Export Corp. v. Commissioner, 91 T.C. 131 (1988).
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