- 74 -
or grain merchandising, rather than the production or manufacture
of a product, we further found that the taxpayers' operations
were not generally considered to constitute the manufacture or
production of grain within the meaning of section 1.993-
3(c)(2)(iii), Income Tax Regs. Id. at 23-32.
Application of the Facts and Circumstances Test of Section
1.954-3(a)(4)(iii), Income Tax Regs., to the Present Cases
Were the Assembly Operations At Issue
Substantial in Nature?
Petitioners contend that the respective assembly operations
conducted by B&L Ireland and B&L Hong Kong were substantial in
nature. Respondent disagrees.
To determine whether the respective sunglass assembly opera-
tions conducted by B&L Ireland and B&L Hong Kong were substantial
in nature, we must examine the facts and circumstances surround-
ing those operations. Sec. 1.954-3(a)(4)(iii), Income Tax Regs.
Respondent contends that those assembly operations were so simple
that they did not require sufficient skill and judgment to rise
to the level of being substantial in nature. We disagree.
We have found that operators at both B&L Ireland and B&L
Hong Kong required training and experience in sunglass assembly
techniques before they became proficient at assembling sun-
glasses. At the B&L Ireland sunglass assembly facility, the
training period for each new operator, which included one-on-one
supervision by a full-time instructor, lasted 13 weeks. At the
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