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In cases where we have considered whether there has been an
abuse of the Commissioner’s discretion, we have occasionally
received pre-deficiency notice matter into evidence and looked
behind the notice. See Capitol Fed. Sav. & Loan Association &
Sub. v. Commissioner, 96 T.C. 204, 214 (1991); Branerton Corp. v.
Commissioner, 64 T.C. 191, 200-201 (1975). In this case, it is
appropriate to include in the record such evidence to enable
petitioners to have a fair opportunity to meet their burden.
Accordingly, respondent’s objection to these exhibits is
overruled.
II. Factual Overview
These cases present complex factually oriented section 482
reallocation and arm’s-length pricing issues. The parties did
not detail, and we have not attempted to detail every aspect of
petitioners’ operations; i.e., HIC’s numerous second- and third-
tier subsidiaries, and the myriad individual hotel entities. We
have found the essential and suitable representative facts to
explain and identify the entities and their practices and other
foundational facts to support our ultimate findings and holdings
on the issues.
For trial purposes, the parties have generally focused on
the issues without attempting to distinguish one taxable year
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