Rocco Femia discusses the Ninth Circuit’s reversal of the Tax Court’s decision in Xilinx et al. v. Commissioner, in which the Circuit ruled that related companies in a cost-sharing agreement must share all costs in a joint venture. Femia called the decision "a major victory for the government." The decision "suggests the IRS could by regulation take positions definitively at odds with the arm's-length standard," Femia said. "The court characterizes the arm's-length standard as a regulatory gloss on the statute rather than a fundamental principle," he said. According to Femia, the court's analysis has additional ramifications for the temporary section 482 cost-sharing regs that were published in January, because the regs are "highly rules based and prescriptive in nature.”