- 98 -
and (7) the location of the persons purchasing the goods or
services. Id. Generally, if the income-producing activity of
the CFC takes place within the country in which the CFC is or-
ganized, the formation of that company will not be considered to
have a significant purpose of reducing taxes. Id.
Petitioners argue, and respondent does not dispute, that
during petitioners' taxable years ended December 25, 1983,
through December 28, 1986, B&L Hong Kong had income from the
following three principal sources: (1) The sale of sunglasses
assembled by B&L Hong Kong, (2) the sale of B&L products not
assembled by B&L Hong Kong,43 and (3) interest. It is not clear
from the record whether B&L Hong Kong had income from any other
sources during those years. To the extent that B&L Hong Kong had
any such income that is at issue herein, petitioners have failed
to carry their burden of proving that such income is excludible
from their gross income for those years under section 954(b)(4).
As for the three sources of B&L Hong Kong's income about
which petitioners argue under section 954(b)(4), we have held
that the income of B&L Hong Kong attributable to the sale of
sunglasses it assembled is not subpart F income for any of the
years at issue. Therefore, we need not determine whether the
exception in section 954(b)(4) applies to that income.
43 Petitioners do not argue that B&L Hong Kong sold any products
manufactured in Hong Kong other than the sunglasses it assembled.
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