Xilinx Inc. and Subsidiaries - Page 41

                                        -41-                                          
         1.482-1, Income Tax Regs.  Simply put, the regulations applicable            
         to the years in issue did not authorize respondent to require                
         taxpayers to share the spread or the grant date value relating to            
         ESOs.  Petitioners are merely required to be compliant, not                  
         prescient.  Accordingly, we hold that respondent’s allocations               
         are arbitrary and capricious; petitioners’ allocations meet the              
         arm’s-length standard mandated by section 1.482-1, Income Tax                
         Regs.; and petitioners are not liable for the section 6662(a)                
         penalties.                                                                   
              Contentions we have not addressed are irrelevant, moot, or              
         meritless.                                                                   
              To reflect the foregoing and concessions made by the                    
         parties,                                                                     
                                                 Decisions will be                    
                                            entered under Rule 155.                   








         [Reporter’s Note:  This opinion was modified by Order dated September 29, 2005.]

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