Xilinx Inc. and Subsidiaries - Page 22

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         leave to file a second amendment to the answer in docket No.                 
         4142-01 and an amendment to the amended answer in docket No. 702-            
         03.  In this motion, respondent included the number of options at            
         issue and the amounts of the revised deficiencies.  Pursuant to              
         his grant date theory, the amounts of the revised deficiencies               
         relating to 1997, 1998, and 1999 are $25,121,951, $27,854,698,               
         and $24,784,465, respectively.  On June 3, 2004, the Court                   
         granted respondent’s motion but concluded that respondent’s                  
         amendment raised a new matter because “the grant date theory                 
         requires different evidence (i.e., includes additional options               
         and utilizes a different method of valuation)” and alters the                
         original deficiency.  On July 14, 2004, the trial commenced.                 
                                    Discussion                                        
         I.   Applicable Statute and Regulations                                      
              A.   Purpose and Scope of Section 482                                   
              Section 482 was enacted to prevent tax evasion and ensure               
         that taxpayers clearly reflect income relating to transactions               
         between controlled entities.  It accomplishes this purpose by                
         authorizing respondent:                                                      
              [to] distribute, apportion, or allocate gross income,                   
              deductions, credits, or allowances between or among                     
              * * * [controlled entities], if he determines that such                 
              distribution, apportionment, or allocation is necessary                 
              * * * to prevent evasion of taxes or clearly to reflect                 
              the income of * * * [such entities].                                    







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