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related party who sold the property to the CFC, are substantial
in nature.
Based on our examination of the entire record before us, we
find that the sunglass assembly operations conducted by B&L
Ireland and by B&L Hong Kong with respect to the parts they
purchased from related parties were substantial in nature within
the meaning of section 1.954-3(a)(4)(iii), Income Tax Regs.
Were the Assembly Operations at Issue Generally
Considered to Constitute the Manufacture of Sunglasses?
Petitioners contend that the respective sunglass assembly
operations conducted by B&L Ireland and B&L Hong Kong were gen-
erally considered to constitute the manufacture of sunglasses.
Respondent disagrees.
The determination of whether the assembly operations of a
company are generally considered to constitute the manufacture of
a product is based on the facts and circumstances surrounding
those operations. Sec. 1.954-3(a)(4)(iii), Income Tax Regs. The
most important factor in making that determination is whether the
industry in which the company is involved generally considers
those operations to constitute the manufacture or production of
property. See Garnac Grain Co. v. Commissioner, 95 T.C. at 29;
Webb Export Corp. v. Commissioner, 91 T.C. at 148.
Petitioners argue that we should look to the sunglass in-
dustry to determine whether it generally considers the respective
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