Xilinx Inc. and Subsidiaries - Page 29

         proposed by respondent automatically produces an arm’s-length                
         result without reference to what arm’s-length parties would do.              
         Therefore, respondent’s litigating position is contrary to his               
         regulations.  See Phillips v. Commissioner, 88 T.C. 529, 534                 
         (1987) (stating respondent “may not choose to litigate against               
         the officially published rulings * * * without first withdrawing             
         or modifying those rulings.  The result of contrary action is                
         capricious application of the law”), affd. 851 F.2d 1492 (D.C.               
         Cir. 1988).  Pursuant to the express language of section 1.482-              
         1(a)(1), Income Tax Regs., we conclude that the arm’s-length                 
         standard is applicable in determining the appropriate allocation             
         of costs pursuant to section 1.482-7, Income Tax Regs.                       
              C.   Legislative and Regulatory History Support the                     
                   Applicability of the Arm’s-Length Standard to Section              
                   1.482-7, Income Tax Regs.                                          
              Respondent contends that the legislative and regulatory                 
         history relating to the 1986 amendment to section 482 establishes            
         that, for purposes of determining the arm’s-length result in                 
         cost-sharing arrangements, Congress intended to supplant the use             
         of comparable transactions with internal measures of cost and                
              It is unnecessary and inappropriate to resort to                        
         legislative, and certainly not to regulatory, history, because               
         section 1.482-1(b)(1), Income Tax Regs., is unambiguous.  Union              
         Carbide Corp. & Subs. v. Commissioner, supra at 384.  Even if the            

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