Gwendolyn A. Ewing - Page 14

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          position deserves our deference, and we do not interfere unless             
          the Commissioner’s determination is arbitrary, capricious,                  
          clearly unlawful, or without sound basis in fact or law.  See,              
          e.g., Thor Power Tool Co. v. Commissioner, 439 U.S. 522, 532-533,           
          550 (1979); Jonson v. Commissioner, 118 T.C. at 125; see also               
          Patton v. Commissioner, 116 T.C. 206, 210 (2001); Buzzetta                  
          Constr. Corp. v. Commissioner, 92 T.C. 641, 648 (1989); Oakton              
          Distribs., Inc. v. Commissioner, 73 T.C. 182, 188 (1979).                   
               Our longstanding practice has been to hold trials de novo in           
          many situations where an abuse of discretion standard applies.              
          In those cases, our practice has not been to limit taxpayers to             
          evidence contained in the administrative record or arguments made           
          by the taxpayer at the administrative level.  Examples of actions           
          in which we conduct a trial de novo are whether it was an abuse             
          of discretion for the Commissioner to (1) determine that a                  
          taxpayer’s method of accounting did not clearly reflect income              
          under section 446, e.g., Thor Power Tool Co. v. Commissioner,               
          supra at 533 (Supreme Court used Tax Court findings in making its           
          determination); Mulholland v. United States, 25 Cl. Ct. 748                 
          (1992);8 (2) reallocate income or deductions under section 482,             

               8 The U.S. Court of Federal Claims conducts a trial de novo            
          in tax refund cases in which the Commissioner has exercised                 
          discretion and determined that the taxpayer’s method of                     
          accounting does not clearly reflect income under sec. 446(b).               
          Mulholland v. United States, 25 Cl. Ct. 748 (1992).  In                     
          Mullholland, the Claims Court rejected the Government’s                     
                                                             (continued...)           





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