- 28 -
Cir. 1991); G.D. Searle & Co. v. Commissioner, 88 T.C. 252, 358
(1987); Paccar, Inc. v. Commissioner, 85 T.C. 754, 787 (1985),
affd. 849 F.2d 393 (9th Cir. 1988). "Whether respondent has
exceeded his discretion is a question of fact. * * * In
reviewing the reasonableness of respondent's determination, the
Court focuses on the reasonableness of the result, not on the
details of the methodology used." Sundstrand Corp. & Subs. v.
Commissioner, supra at 353-354; see also American Terrazzo Strip
Co. v. Commissioner, 56 T.C. 961, 971 (1971). In most instances
where respondent abandons his notice position at trial, courts
conclude that allocations in the notice under section 482 are
arbitrary and capricious. See, e.g., Sundstrand Corp. & Subs. v.
Commissioner, supra at 354-358; Perkin-Elmer Corp. & Subs. v.
Commissioner, T.C. Memo. 1993-414.
Petitioner contends that respondent did not present evidence
to support the deficiencies in the notice. In determining the
notice amounts, respondent redetermined the Compaq Asia prices
using section 1.482-2A(e)(1)(iii), Income Tax Regs. Accordingly,
respondent increased Compaq Asia manufacturing costs by an
operating profit of 7.5 percent, resulting in a $232,402,000
income allocation with respect to Compaq Asia PCA's. This
adjustment was based on reports of respondent's staff economist,
Balash. At trial, Balash did not testify as an expert, and the
opinion portion of his report was not admitted as expert
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