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methodology employed. Bausch & Lomb, Inc. v. Commissioner, supra at
582; see also Eli Lilly & Co. v. United States, 178 Ct. Cl. 666, 372
F.2d 990, 997 (1967).
In addition to proving that the deficiencies set forth in the
notice of deficiency are arbitrary, capricious, or unreasonable, the
taxpayer has the burden of proving satisfaction of the arm's-length
standard. See Sundstrand Corp. v. Commissioner, supra at 354.
b. The Regulations in General
Section 1.482-2(d), Income Tax Regs., provides a framework for
determining an arm's-length consideration for the transfer, sale,
assignment or loan of intangible property or an interest therein
between members of a group of controlled entities. Section
1.482-2(d)(3)(ii)(a), Income Tax Regs., specifically identifies
"patents" as intangible property. Accordingly, we shall apply
section 1.482-2(d), Income Tax Regs., in making our inquiry as to an
arm's-length consideration for the rights Powertex received under
the Tri-Podd license agreement.
An arm's-length consideration is defined specifically as "the
amount that would have been paid by an unrelated party for the same
intangible property under the same circumstances." Sec.
1.482-2(d)(2)(ii), Income Tax Regs. The best indication of such
arm's-length consideration generally is transfers by the same
transferor to unrelated parties for the same or similar intangible
property under the same or similar circumstances. Id. If a
sufficiently similar transaction involving an unrelated party is
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