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abused his discretion and may not change Qwest’s incremental cost
allocation method to an average cost allocation method under
section 446(b).
V. Conclusion
Petitioners have met their burden of proving that 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. Additionally, respondent’s
determination that Qwest’s incremental cost allocation method
failed to clearly reflect income was an abuse of discretion, and
thus respondent may not change Qwest’s method to an average cost
method.
In reaching our holdings, we have considered all arguments
and contentions made, and, to the extent not mentioned, we
conclude that they are moot, irrelevant, or without merit.
To reflect the foregoing and the concessions of the parties,
Decision will be
entered under Rule 155.
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