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transferred between such persons, shall be determined
by the Secretary in the Secretary's sole discretion,
based on the Secretary's own knowledge or from such
information as the Secretary may choose to obtain.* * *
The conferees wish to clarify that the exercise of
the Secretary's sole discretion to establish allowable
amounts of deductions and the cost of goods sold in the
event of noncompliance shall be subject only to limited
judicial review. * * * In addition, the conferees do
not expect a court to overturn a determination on
grounds that the Secretary might have sought to obtain
additional information but failed to do so. [Id. at
593-594.]
The standard of proof is not identical to that in a section
482 case--proving that the Commissioner's allocations are
arbitrary, capricious, or unreasonable. Rather, the standard of
proof under section 6038A(e)(3) requires petitioner to show by
clear and convincing evidence and without reference to
information not in respondent's possession or knowledge when the
determination was made, that respondent's determination was made
with an improper motive or is clearly erroneous in light of all
reasonably credible interpretations or assumptions of facts.
Petitioner has not argued improper motive on the Secretary's
part. The parties do not disagree on what information was in
respondent's possession when she issued the notice of deficiency
and determined that petitioner's cost of goods sold and net
operating loss should be adjusted downward. Based on that
information, and that information alone, we must decide if
respondent abused her discretion, applying the standard set forth
above, in determining the deficiency under section 6038A.
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