- 9 - that the FARS contracts are not comparable to the circumstances in this case. The parties’ disagreement raises several questions about the regulations. Firstly, we must consider whether the Commissioner must be aware of an actual arm’s-length transaction before allocating costs between controlled entities that have a bona fide cost-sharing arrangement. Secondly, if an actual arm’s- length example is not required, then we must decide whether the Commissioner must possess facts and/or admissible evidence before making such an allocation.5 We do not agree with petitioner’s perception that respondent would have to be aware of an actual arm’s-length transaction as a prerequisite to making any allocations. Section 1.482-2(d)(4), Income Tax Regs., limits the Commissioner’s ability to make an allocation, in the case of a bona fide cost-sharing arrangement, to the appropriate reflection of each participant’s arm’s-length share of the costs and risks of developing the property. The regulation goes on to direct that cost-sharing arrangements will be considered “arm’s length” where the “terms and conditions [are] comparable to those which would have been adopted by unrelated parties similarly situated had they entered into such 5 The parties have raised several other factual and/or legal questions that need not be addressed in the setting of this summary judgment motion because of our conclusion that there is a genuine issue as to a material fact.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011