ASAT, Inc. - Page 32

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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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