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information does not exist in this record; (3) the expert used
1991 and 1992 cost figures for DHLI which are different from
those used by the parties and contained in the record; (4) the
expert used a 15-percent markup (same as used in the notices of
deficiency but different from the 4 percent advanced by
respondent for purposes of litigation and 2 percent used by the
parties) without analysis of comparable companies to determine
what an appropriate markup should be, and respondent also points
out that petitioners argued that the 15-percent markup used for
the notice determinations was arbitrary and capricious; and (5)
the expert’s use of package or document weight is unjustified and
does not comport with the parties’ agreement that uses a weighted
cost that accounts for the difference in costs between packages
and documents, and therefore no further adjustment is necessary
to the imbalance cost.
The record and most of the expertise provided by the parties
support DHL’s and DHLI’s 1987 approach to the imbalance and
transfers as one that is arm’s length, and we so hold.
Petitioners did not provide any other reciprocal arrangements
with unrelated parties that were under the same or similar
circumstances as those advanced by their expert. See sec. 1.482-
2(d)(2)(ii), Income Tax Regs. Accordingly, we used a facts and
circumstances approach to deciding an arm’s-length markup. Sec.
1.482-2(d)(2)(iii), Income Tax Regs. Regarding the failure to
account or pay for imbalances or transfers before 1987, we hold
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