H Group Holding, Inc. and Subsidiaries - Page 73




                                        - 59 -                                         

               Section 482 determinations are to be sustained absent a                 
          showing that the Commissioner’s discretion was abused.  See                  
          Paccar, Inc. v. Commissioner, 85 T.C. 754, 787 (1985), affd. 849             
          F.2d 393 (9th Cir. 1988).  Consequently, taxpayers bear a heavier            
          than normal burden of proving that the Commissioner’s section 482            
          allocations are arbitrary, capricious, or unreasonable.  See Your            
          Host, Inc. v. Commissioner, 489 F.2d 957, 960 (2d Cir. 1973),                
          affg. 58 T.C. 10, 23 (1972); Seagate Tech., Inc. & Consol. Subs.             
          v. Commissioner, supra at 164; G.D. Searle & Co. v. Commissioner,            
          88 T.C. 252, 359 (1987).  Whether the Commissioner’s discretion              
          has been abused is a question of fact.  See American Terrazzo                
          Strip Co. v. Commissioner, 56 T.C. 961, 971 (1971).  In reviewing            
          the reasonableness of the Commissioner’s allocation under section            
          482, we focus on the reasonableness of the result, not the                   
          details of the methodology employed.  See Bausch & Lomb, Inc. v.             
          Commissioner, supra at 582; see also Eli Lilly & Co. v. United               
          States, 178 Ct. Cl. 666, 676, 372 F.2d 990, 997 (1967).  The                 
          applicable standard is arm’s-length dealing between taxpayers                
          unrelated either by ownership or control.  See sec. 1.482-                   
          1(b)(1), Income Tax Regs.14  Taxpayers bear the burden of showing            
          that the standard they used or that they proposed is arm’s                   


               14  References to the income tax regulations under sec. 482             
          are to the 1968 regulations as amended and in effect for the tax             
          years under consideration.                                                   




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