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employees as to certain parts of the manufacturing process. He
was not a foreman for PPI’s assembly line employees, nor did he
hire and fire them. However: (1) He made sure that mistakes were
corrected; (2) he “[watched] out for EA’s interests” as to the
assembly work; and (3) “If things were going wrong [as to the
assembly line], then PPI would call me in for assistance.”
In MedChem (P.R.), Inc. v. Commissioner, 116 T.C. at 338
n.14, we stated as follows:
14 We distinguish Frank v. International Canadian Corp., 308
F.2d 520 (9th Cir. 1962), a case cited by petitioners to
support their assertion that MedChem P.R. actively conducted
a trade or business by virtue of its sales activity. The
relevant holding in Frank concerned whether the taxpayer
actively conducted a trade or business and did not concern
where that trade or business was located.
In the instant cases, EAPR’s activities in Puerto Rico with
respect to the video games are critically different from the
taxpayer’s activities in MedChem (P.R.), Inc. v. Commissioner,
supra (where the taxpayer’s only activities in Puerto Rico were
the taking of steps to move the business from Puerto Rico to
Massachusetts), and Kewanee Oil Co. v. Commissioner, supra (where
substantially all the taxpayer’s relevant income was derived from
the sale of substantially all the taxpayer’s relevant business).
Our findings (supra I.F.) lead us to conclude that EAPR,
through its manager, participated regularly, continually,
extensively, and actively in the management and operation of the
manufacturing of video games in Puerto Rico.
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