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contentions, Compaq Asia was not competing with unrelated
subcontractors in Singapore because those entities did not have
the technology, equipment, engineering, or training required to
make Compaq U.S. PCA's. Compaq U.S. exercised its business
judgment during 1991 and 1992, when it needed additional PCA's,
in purchasing those PCA's from unrelated subcontractors in the
United States. Respondent may not substitute his business
judgment for petitioner's under the guise of a section 482
allocation. See Bausch & Lomb, Inc. v. Commissioner, 92 T.C. at
593; Seminole Flavor Co. v. Commissioner, 4 T.C. 1215, 1235
(1945).
Compaq U.S. did, however, incur higher freight and duty
costs when shipping PCA's from Compaq Asia rather than from the
mostly U.S.-based unrelated subcontractors. Thus, price
adjustments to reflect these differences are appropriate but do
not render uncontrolled sales noncomparable. See sec. 1.482-
2A(e)(2)(ii), Example (1), Income Tax Regs. The incremental
freight costs that were required to ship PCA's from Compaq Asia
during 1991 and 1992 were $2.6 million, decreasing the Compaq
Asia aggregate price by that amount. The parties also stipulated
to the net duty costs that were incurred on the Compaq U.S.
purchase of Compaq Asia PCA's. Compaq U.S. would not have
incurred this net duty cost if it had purchased the PCA's from
the primarily U.S.-based unrelated subcontractors. During 1991
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