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For purposes of section 936(a), MedChem P.R.’s “ business
presence” in Puerto Rico was insignificant in that it did not
contribute significantly to Puerto Rico’s economy either by
creating new jobs or by providing capital to others to build new
plants and equipment. See S. Rept. 94-938, supra at 277-278,
1976-3 C.B. (Vol. 3) at 315-316; see also H. Rept. 94-658, supra,
1976-3 C.B. (Vol. 2) at 946-947. All of MedChem P.R.’s business
activities after June 30, 1990, were based in Woburn, and
petitioners’ primary connection to Puerto Rico during that time
was to further its efforts to move the manufacturing of Avitene
to Woburn, where the nonmanufacturing, Avitene-related business
and ancillary activities (e.g., financial oversight, sales, and
product development) were performed by MedChem U.S.A. employees.
Petitioners rely on the fact that title to the non-Japanese-
market Avitene passed from MedChem P.R. to MedChem U.S.A. in
Puerto Rico. We do not believe that this fact, standing alone,
leads to petitioners’ proffered conclusion that MedChem P.R.
actively conducted a trade or business in Puerto Rico throughout
the 3-year period. Indeed, the facts of this case leads us to a
contrary conclusion.15 Avitene was manufactured in Puerto Rico
14(...continued)
in Frank concerned whether the taxpayer actively conducted a
trade or business and did not concern where that trade or
business was located.
15 Petitioners rely in part on their assertion in brief that
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