-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
profit.
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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