Medchem (P.R.), Inc. - Page 1

                                   116 T.C. No. 25                                    

                               UNITED STATES TAX COURT                                

                         MEDCHEM (P.R.), INC., Petitioner v.                          
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      
                         MEDCHEM PRODUCTS, INC., Petitioner v.                        
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

          Docket Nos. 4065-98, 4066-98.            Filed May 18, 2001.                

                    P-USA is a corporation that is headquartered and                  
               has its manufacturing facility in the United States.                   
               Its wholly owned subsidiary is P-PR, which lists as its                
               headquarters, officers, and directors the headquarters,                
               officers, and directors of P-USA.  A is a corporation                  
               unrelated to Ps that manufactures in Puerto Rico a drug                
               named Avitene.  On Dec. 18, 1987, A and certain related                
               entities sold to Ps the equipment, technology, and                     
               other assets (except A’s manufacturing facility in                     
               Puerto Rico) connected to Avitene’s manufacturing.  As                 
               part of the sale, A agreed to continue manufacturing                   
               Avitene primarily for P-PR using the facility and labor                
               furnished by A and the raw materials and equipment                     
               furnished by P-PR.  (A also used P-USA’s technology.)                  
               In return, P-PR generally agreed to pay A a fee equal                  
               to its manufacturing costs plus 10 percent.  Throughout                
               most of the relevant period, P-PR had no employees and                 

Page:   1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011