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dispute that EA bought from EAPR were manufactured in
Puerto Rico.
Petitioners moved for partial summary judgment,
contending that (1) EAPR is entitled to possessions tax
credits because it met the “active conduct of a trade
or business” in Puerto Rico requirement of sec.
936(a)(2)(B), I.R.C. 1986, and (2) in determining the
amount of these credits, EAPR is entitled to compute
its income under the profit split method (sec.
936(h)(5)(C)(ii), I.R.C. 1986) because it maintained a
“significant business presence” in Puerto Rico within
the meaning of sec. 936(h)(5)(B)(ii), I.R.C. 1986.
1. Held: Ps are entitled to partial summary
judgment that EAPR met the “active conduct of a trade
or business” in Puerto Rico requirement of sec.
936(a)(2)(B), I.R.C. 1986. MedChem (P.R.), Inc. v.
Commissioner, 116 T.C. 308 (2001), on appeal (1st Cir.,
Aug. 24, 2001), followed as to the law and
distinguished on the facts.
2. Held, further, Ps are entitled to partial
summary judgment that EAPR maintained a “significant
business presence” in Puerto Rico within the meaning of
sec. 936(h)(5)(B)(ii), I.R.C. 1986, without regard to
the requirements of the final flush language of that
provision.
3. Held, further, Ps have failed to show that they
are entitled to partial summary judgment that EAPR
maintained a “significant business presence” in Puerto
Rico within the meaning of sec. 936(h)(5)(B)(ii),
I.R.C. 1986, taking into account the requirements of
the final flush language of that provision. That is,
Ps have failed to show that the video games were
“manufactured * * *in * * * [Puerto Rico] by * * *
[EAPR] within the meaning of subsection (d)(1)(A) of
section 954”, I.R.C. 1986.
A. Duane Webber and Andrew P. Crousore, for petitioners.
Michael R. Cooper, William R. Davis, Jr., Gregory M. Hahn,
and Virginia L. Hamilton, for respondent.
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