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of proof. Unlike the circumstances in Perkin-Elmer Corp. v.
Commissioner, supra, respondent has not abandoned the notice
positions and advanced new ones.4 Petitioners have not shown
that any of respondent’s section 482 determinations are
arbitrary, capricious, or unreasonable on the basis of the
information available to respondent at the time of the issuance
of the notices of deficiency.5 We hold that respondent’s failure
to provide pre-notice reports, either alone or in conjunction
with the larger amounts determined in the notices as opposed to
the trial position amounts, does not provide a predicate for the
remedial action sought by petitioners.
In this setting, respondent’s notice determinations were not
shown to be arbitrary, capricious, or unreasonable. Although
respondent’s trial position amounts are considerably less than
the amounts determined in the notices, with the exception of the
network fee adjustment, respondent’s notice positions were not
abandoned or ignored. To some extent, the reduced adjustments
4 Our reference to “positions” here does not include the
“network fee adjustment”.
5 Petitioners ask us to judge respondent’s actions in the
notices of deficiency. Obviously, we cannot judge whether
respondent’s determinations were arbitrary, capricious, or
unreasonable on the basis of the information available to
respondent after the trial record has been made, unless that
information was available to respondent when the determination
was made. In the context of petitioners’ preemptive approach, we
consider respondent’s actions on the basis of the knowledge that
was made available by petitioners. To do otherwise would
encourage taxpayers to keep from the Commissioner the information
they possess and then criticize the Commissioner’s lack of
information to the taxpayers’ advantage.
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