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Petitioners argue that respondent has, therefore, abandoned
the grounds for the section 482 allocations that were set forth
in the notices of deficiency. Petitioners also argue that, by
abandoning the deficiency notice grounds, respondent has conceded
that the original determinations were arbitrary, capricious, or
unreasonable. Respondent counters that the grounds for the
allocations have not been abandoned, that the underlying theories
are the same, and that the substitution of new expert reports,
per se, does not establish that the notice determinations were
arbitrary. Respondent also points out that his trial experts’
report or opinion was affected by the acquisition of information
that was acquired after the issuance of the notice of deficiency
and therefore not available to the prenotice experts.16
Prior to issuing the deficiency notices, respondent assigned
Dr. Mooney the task of analyzing whether and to what extent
section 482 allocations of income or deductions are warranted
between HIC and certain of its subsidiaries involving the
management of foreign hotels. Dr. Mooney prepared a report
(Mooney report) dated February 15, 1986, entitled “Economic
Evaluation of the Performance of Hyatt of Hong Kong, Ltd.” The
Mooney report was included as part of the revised International
16 In this regard, no claim is made here that respondent
was systematically kept from the information that would have had
an effect on the deficiency notice determinations. See, e.g.,
DHL Corp. v. Commissioner, T.C. Memo. 1998-461.
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