Xilinx Inc. and Subsidiaries - Page 17

         petitions were filed.  On April 4, 2002, the parties stipulated              
         that no amount relating to ESOs would be included in petitioner’s            
         1996 cost-sharing pool.                                                      
              B.   Summary Judgment Motions                                           
              The Court filed petitioners’ motion for partial summary                 
         judgment on February 4, 2002, and on March 6, 2002, filed                    
         respondent’s cross-motion for partial summary judgment.  On                  
         October 28, 2003, we denied both parties’ motions, addressed                 
         whether the spread is a cost pursuant to section 1.482-7(d)(1),              
         Income Tax Regs., and concluded:                                             
              respondent has not established that the spread is                       
              indeed a cost or that the exercise date is the                          
              appropriate time to determine and measure such cost.                    
              * * *  In addition, * * * petitioner has not                            
              sufficiently established that it did not incur an                       
              expense upon the employee’s exercise of the options at                  
         The Court also addressed whether respondent’s lack of knowledge              
         of comparable transactions (i.e., where unrelated parties agree              
         to share the spread), or a finding that uncontrolled parties                 
         would not share the spread, would have any effect on respondent’s            
         authority to make allocations pursuant to section 1.482-1(a)(2),             
         Income Tax Regs.  We concluded:                                              
              Section 1.482-1(b)(2), Income Tax Regs., does not                       
              require respondent to have actual knowledge of an                       
              arm’s-length transaction as a prerequisite to                           
              determining that an allocation should be made.  See                     
              Seagate Technology, Inc. v. Commissioner, T.C. Memo.                    
              2000-388.  If, however, it is established that                          

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