- 59 - direct-labor test for purchases and resales, set forth in subclauses (I), (II), and (III), respectively, of section 936(h)(5)(B)(ii). However, the final flush language of section 936(h)(5)(B)(ii) provides that, if the possessions corporation claims the profit split method with respect to a product that the possessions corporation produces in whole or in part in the possession, then the possessions corporation does not have a significant business presence in that possession-- unless such product is manufactured or produced in the possession by the electing corporation within the meaning of subsection (d)(1)(A) of section 954. Respondent refers to the alternative tests set out in the three subclauses of section 936(h)(5)(B)(ii) as “the first prong”, and refers to the test set out in the final flush language of section 936(h)(5)(B)(ii) as “the second prong”. That terminology appears to be helpful, and we use it in the instant opinion. 2. Parties’ Contentions Many of the parties’ contentions on this issue are similar to those that they made with respect to the active-conduct-of-a- trade-or-business issue. In particular, respondent contends that petitioners’ partial summary judgment motion must be denied because (1) “as a matter of law * * * Petitioners cannot attribute the activities of the PPI [employees] or EA employees to EAPR” to satisfy the significant-business-presence test underPage: Previous 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 Next
Last modified: May 25, 2011