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companies (1) leased production facilities to assemble sunglasses
and warehouses to store finished goods; (2) employed management
teams to prepare production plans and order parts from their
suppliers; (3) hired and trained the necessary personnel to carry
out their operations; (4) inspected purchased parts for defects
and prepared those parts for assembly; (5) assembled sunglass
parts into finished sunglasses; (6) inspected finished sunglasses
for cosmetic and functional defects; and (7) cleaned and packaged
sunglasses to prepare them for distribution. All of those ac-
tivities were necessary and essential to the assembly by B&L
Ireland and by B&L Hong Kong of the purchased sunglass parts into
finished, quality sunglasses that met B&L's quality standards and
that were ready for sale to the ultimate consumers.
Respondent also argues that the respective assembly opera-
tions conducted by B&L Ireland and B&L Hong Kong were not sub-
stantial in nature when compared to the fabrication of the parts
used in those operations. Respondent's argument misses the mark.
Section 1.954-3(a)(4)(iii), Income Tax Regs., requires a deter-
mination of whether "the operations conducted by the selling
corporation in connection with the property purchased and sold
are substantial in nature". Under those regulations, we examine
the distinct operations conducted by the CFC with respect to the
purchased property to determine if those operations, standing
alone and without regard to the operations conducted by the
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