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the arm's length charge shall be deemed equal to the
costs or deductions incurred with respect to such
services * * * unless the taxpayer establishes a more
appropriate charge * * *
In pertinent part, section 1.482-2(b)(7)(ii)(A), Income Tax
Regs., provides: "Services are an integral part of the business
activity of a member of a controlled group where the renderer
renders services to one or more related parties as one of its
principal activities."
Section 1.482-1(a)(4), Income Tax Regs., provides: "The
term 'controlled taxpayer' means any one of two or more
organizations, trades, or businesses owned or controlled directly
or indirectly by the same interests."
B. Burden of Proof
Respondent’s authority to make allocations under section 482
is broad. Bausch & Lomb, Inc. v. Commissioner, 92 T.C. 525, 581-
582 (1989), affd. 933 F.2d 1084 (2d Cir. 1991); Edwards v.
Commissioner, 67 T.C. 224, 230 (1976); PPG Indus., Inc. v.
Commissioner, 55 T.C. 928, 990-991 (1970). Respondent’s section
482 determination must be sustained absent a showing that he has
abused his discretion. Paccar, Inc. v. Commissioner, 85 T.C.
754, 787 (1985), affd. 849 F.2d 393 (9th Cir. 1988). The
determination of whether respondent abused his discretion
presents a question of fact, and petitioners bear the burden of
proof. Rule 142(a). Indeed, in order for us to redetermine a
deficiency attributable to section 482, petitioners bear the
heavier than normal burden of proving that respondent’s section
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