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Generally, the Commissioner’s determination under section
446(b) is to be respected unless it is found to be an abuse of
discretion. Exxon Mobile Corp. v. Commissioner, 114 T.C. 293,
324 (2000); Ansley-Sheppard-Burgess Co. v. Commissioner, supra at
371. In reviewing the Commissioner’s determination, the function
of the Court is to determine whether there is an adequate basis
in law for the Commissioner’s conclusion. RCA Corp. v. United
States, 664 F.2d 881, 886 (2d Cir. 1981); Ansley-Sheppard-Burgess
Co. v. Commissioner, supra at 371. Finding that the Commissioner
abused his discretion under section 446(b) is not preconditioned
on finding that the taxpayer’s method clearly reflects income.
See Bank One Corp. v. Commissioner, supra at 289.
Section 1.263A-1(g)(3), Income Tax Regs., does not require
that the reasonableness standard of section 1.263A-1(f)(4),
Income Tax Regs., be applied to first level cost allocations
under sections 1.263A-1(e)(3)(i) and 1.451-3(d)(6)(ii), Income
Tax Regs. As held above, Qwest’s incremental cost allocation
method is a reasonable allocation method for purposes of sections
1.263A-1(e)(3)(i) and 1.451-3(d)(6)(ii), Income Tax Regs. For
these reasons, respondent’s sole basis for arguing that Qwest’s
method of accounting does not clearly reflect income necessarily
fails. Respondent’s determination that Qwest’s incremental cost
allocation method fails to clearly reflect income does not have
an adequate basis in the law. Therefore, we hold that respondent
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