G. D. Searle & Co. v. Comm'r of Revenue

Citation88 T.C. No. 16,88 T.C. 252
Decision Date04 February 1987
Docket NumberDkt. No. 12836-79
PartiesG. D. SEARLE & CO. AND SUBSIDIARIES, Petitioners v. COMMISSIONER OF REVENUE, Respondent
CourtUnited States Tax Court

OPINION TEXT STARTS HERE

TABLE OF CONTENTS

+-----------------------------------------------------------------------------+
                ¦       ¦                                                               ¦¦Page¦
                +------------------------------------------------------------------------+----¦
                ¦Headnote                                                                ¦255 ¦
                +------------------------------------------------------------------------+----¦
                ¦Introduction and Statement of Issues                                    ¦256 ¦
                +------------------------------------------------------------------------+----¦
                ¦Findings of Fact                                                        ¦257 ¦
                +------------------------------------------------------------------------+----¦
                ¦I.     ¦History and Background of G.D. Searle & Co.                     ¦257 ¦
                +-------+----------------------------------------------------------------+----¦
                ¦       ¦A. Petitioner                                                  ¦¦257 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦B. SCO                                                         ¦¦259 ¦
                +-------+----------------------------------------------------------------+----¦
                ¦II.    ¦History and Background of SCO's Products                        ¦259 ¦
                +-------+----------------------------------------------------------------+----¦
                ¦       ¦A. Aldactone and Aldactazide                                   ¦¦259 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦B. Banthine and Pro-Banthine                                   ¦¦261 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦C. Flagyl                                                      ¦¦262 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦D. Lomotil                                                     ¦¦264 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦E. Ovulen and Demulen                                          ¦¦265 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦F. Serenace                                                    ¦¦267 ¦
                +-------+----------------------------------------------------------------+----¦
                ¦III.   ¦Pharmaceutical Business of Petitioner and Its Subsidiaries      ¦268 ¦
                +-------+----------------------------------------------------------------+----¦
                ¦IV.    ¦Historical Development of the Puerto Rican Operations of        ¦269 ¦
                ¦       ¦Petitioner and SCO                                              ¦    ¦
                +-------+----------------------------------------------------------------+----¦
                ¦       ¦A. Tax Incentives for Puerto Rican Operations                  ¦¦269 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦B. Planning and Formation of SCO                               ¦¦270 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦C. SCO's Puerto Rican Tax Exemption Grants                     ¦¦273 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦D. Initiation of Pharmaceutical Manufacturing by SCO           ¦¦274 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦E. Transfers of Intangible Property to SCO                     ¦¦276 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦F. Marketing Agreement                                         ¦¦277 ¦
                +-------+----------------------------------------------------------------+----¦
                ¦V.     ¦SCO's Manufacturing Activities                                  ¦278 ¦
                +-------+----------------------------------------------------------------+----¦
                ¦       ¦A. Acquisition of Chemical Manufacturing Facility at Caguas    ¦¦278 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦B. Construction of Pharmaceutical Manufacturing Facilities at  ¦¦279 ¦
                ¦       ¦Caguas                                                         ¦¦    ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦C. Management and Personnel                                    ¦¦280 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦D. Manufacturing and Related Activities                        ¦¦280 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦1. Products Manufactured and Sold                              ¦¦280 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦2. Production Planning and Scheduling                          ¦¦283 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦3. Inventory Control and Purchasing                            ¦¦284 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦4. Chemical Sourcing                                           ¦¦286 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦5. Chemical Manufacturing                                      ¦¦290 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦6. Pharmaceutical Manufacturing and Packaging                  ¦¦291 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦7. Production Tickets                                          ¦¦293 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦8. Quality Control                                             ¦¦295 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦9. Product Recalls                                             ¦¦296 ¦
                +-------+----------------------------------------------------------------+----¦
                ¦VI.    ¦Sale and Distribution of SCO's Productions                      ¦298 ¦
                +-------+----------------------------------------------------------------+----¦
                ¦       ¦A. Identity of SCO's Customers                                 ¦¦298 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦B. Orders of SCO's Products                                    ¦¦299 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦C. Billing Procedures                                          ¦¦300 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦D. Other Distribution Procedures                               ¦¦301 ¦
                +-------+----------------------------------------------------------------+----¦
                ¦VII.   ¦Petitioner's Marketing Operations                               ¦301 ¦
                +-------+----------------------------------------------------------------+----¦
                ¦       ¦A. Introduction                                                ¦¦301 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦B. Marketing of SCO's Products                                 ¦¦302 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦1. Sales Representation                                        ¦¦302 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦2. marketing and Sales Administration                          ¦¦305 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦3. SCO's marketing Fee Payments to Petitioner                  ¦¦305 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦4. SCO's Other Marketing Expenses                              ¦¦306 ¦
                +-------+----------------------------------------------------------------+----¦
                ¦VIII.  ¦Research and Development Activities                             ¦307 ¦
                +-------+----------------------------------------------------------------+----¦
                ¦       ¦A. Introduction                                                ¦¦307 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦B. Research and Development Facilities                         ¦¦309 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦1. Petitioner's Facilities                                     ¦¦309 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦2. SCO's Facilities                                            ¦¦311 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦C. Regulatory Requirements                                     ¦¦312 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦D. Petitioner's Regulatory Affairs Services Related to SCO's   ¦¦313 ¦
                ¦       ¦Products                                                       ¦¦    ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦E. Other Research and Development Activities Related to SCO's  ¦¦318 ¦
                ¦       ¦Products                                                       ¦¦    ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦1. Petitioner's Activities                                     ¦¦318 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦2. SCO's Activities                                            ¦¦319 ¦
                +-------+---------------------------------------------------------------++----¦
                ¦       ¦F. Research and Development of New Pharmaceutical Products     ¦¦319 ¦
...

To continue reading

Request your trial
29 cases
  • 3M Co. & Subsidiaries v. Comm'r of Internal Revenue
    • United States
    • United States Tax Court
    • February 9, 2023
    ...its statutory origins in section 240(d) of the Revenue Act of 1921, ch. 136, 42 Stat. at 260.[40] See G.D. Searle & Co. v. Commissioner, 88 T.C. 252, 356 (1987); Reuven S. Avi-Yonah, "The Rise and Fall of Arm's Length: A Study in the Evolution of U.S. International Taxation", 15 Va. Tax Rev......
  • Medchem (P.R.), Inc. v. C.I.R.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (1st Circuit)
    • July 10, 2002
    ...the mid-1970s, when Congress enacted legislation approximating the current version of 26 U.S.C. § 936. See G.D. Searle & Co. v. Comm'r, 88 T.C. 252, 350-52, 1987 WL 49272 (1987) (describing the genesis of § 936). Section 1051 of the 1976 Tax Reform Act added a new U.S.Code section, 26 U.S.C......
  • Podd v. Commissioner, Docket No. 20225-93.
    • United States
    • United States Tax Court
    • June 30, 1998
    ...[Dec. 31,329] 58 T.C. 10, 23 (1972); Seagate Tech., Inc. & Consol. Subs. v. Commissioner, supra at 164; G.D. Searle & Co. v. Commissioner [Dec. 43,685], 88 T.C. 252, 359 (1987). Whether the Commissioner's discretion has been exceeded is a question of fact. American Terrazzo Strip Co., Inc. ......
  • Elec. Arts, Inc. v. Comm'r of Internal Revenue, s. 2433–99
    • United States
    • United States Tax Court
    • March 22, 2002
    ...and we briefly summarized the purpose and history of the statute in accordance with our analyses in G.D. Searle & Co. v. Commissioner, 88 T.C. 252, 350–351, 1987 WL 49272 (1987), and Coca–Cola Co. & Subs. v. Commissioner, 106 T .C. 1, 21, 1996 WL 4126 (1996). From section 262 of the Revenue......
  • Request a trial to view additional results
1 firm's commentaries
  • Medtronic Part Deux: The Best Method Is Yet To Come?
    • United States
    • Mondaq United States
    • September 30, 2022
    ...would have been considered if presented. 5. Sundstrand Corp. v. Commr., 96 T.C. 226, 353 (1991) (citing G.D. Searle & Co. v. Commr., 88 T.C. 252, 358 (1987), and citing Eli Lilly & Co. v. Commr., 84 T.C. 996, 1131 (1985), aff'd. on this issue, rev'd in part and rem'd, 856 F.2d 855 (7th Cir.......
2 books & journal articles
  • Assessing the value of the proposed "no net value" regulations.
    • United States
    • Tax Executive Vol. 57 No. 3, May 2005
    • May 1, 2005
    ...Rep. No. 350, at 9-10 (1921); Portland Oil Co. v. Commissioner, 109 F.2d 479, 488 (1st Cir. 1940); G.D. Searle & Co. v. Commissioner, 88 T.C. 252 (1987); Rev. Rul. 95-74, 1995-2 C.B. (46) Staff of the Joint Committee on Taxation, General Explanation of the Revenue Act of 1978, at 219 (C......
  • Selected Canadian litigation aspects of international pricing disputes: effect of proposed changes.
    • United States
    • Tax Executive Vol. 44 No. 6, November 1992
    • November 1, 1992
    ...84 T.C. 996 (1985), aff'd in part, rev'd in part, rem'd, 856 F.2d 855, 860 (7th Cir. 1988); G.D. Searle & Co. v. Commissioner, 88 T.C. 252 (1987); Bausch & Lomb, Inc. v. Commissioner, 92 T.C. 525 (1989), aff'd, 933 F.2d 1084 (2d Cir. 1991); and Sundstrand Corp. v. Commissioner, 96 T......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT