What is the burden of proving that defendant intends to rely on section 482?

Section 482 gives defendant broad discretion to place controlled taxpayers in the same position as uncontrolled taxpayers dealing at arm's length. Peck v. C.I.R., 752 F.2d 469, 472 (9th Cir.1985). The burden of persuasion is upon plaintiff to show error in the defendant's allocation, and the allocation must be sustained unless it is unreasonable, arbitrary or capricious. Id.

Because of the heavier than normal burden of proving arbitrariness, plaintiff is entitled to notice that defendant intends to rely on section 482. Foster v. Commissioner, 80 T.C. 34, 143 (1983), aff'd in part, vacated in part, 756 F.2d 1430 (9th Cir. 1985) (appellate discussion did not address notice issue), cert. denied, ___ U.S. ___, 106 S.Ct. 793, 88 L.Ed.2d 770 (1986). In the case before this court, plaintiff argues that defendant did not give notice of its intent to rely on section 482 until it filed its answer to plaintiff's first set of interrogatories on November 14, 1984, which was two days before it filed its motion for summary judgment.

Plaintiff cites to Achiro v. Commissioner, 77 T.C. 881, 891 (1981) as providing the proper framework for assigning the burden of proof in section 482 cases:

[647 F. Supp. 1088]

Plaintiff argues that under this reasoning, defendant is not entitled to rely on section 482 at all.