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not prohibited as a matter of law, then there are the following
genuine issues of material fact: (a) Whether the video games
were manufactured in Puerto Rico or in the Dominican Republic;
and (b) “exactly what level of involvement in Puerto Rico EAPR
had in the manufacturing process * * * and whether that level of
manufacturing activity is significant enough to permit the
attribution of the activities of the PPI employees to EAPR for
purposes of the significant business presence test.”
Petitioners contend that EAPR satisfied the first prong of
the significant business presence test by satisfying the direct
labor test of section 936(h)(5)(B)(iii)(II). Petitioners contend
that EAPR satisfied the second prong of the significant business
presence test, and thus is eligible to use the profit split
method, because EAPR met all the manufacturing requirements of
section 1.954-3(a)(4), Income Tax Regs. Petitioners maintain
that PPI was not the manufacturer within the meaning of the cited
regulation. Petitioners also rely on the inventory provisions
(sections 471 and 263A, and the regulations thereunder, and Rev.
13(...continued)
“Revenue rulings represent only the Commissioner’s
position concerning specific factual situations, rather
than substantive authority for deciding a case in this
court.” Id. at 360. Other courts have similarly held
that revenue rulings are not binding on the
Commissioner, the Secretary or the courts. Schuster v.
Commissioner, 800 F.2d 627 (7th Cir. 1986), aff’g 84
T.C. 764 (1985), citing Dickman v. Commissioner, 465
U.S. 330 (1984); Stubbs, Overbeck & Associates v.
United States, 445 F.2d 1142 (5th Cir. 1971).
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