The review, concluded last month, contests Cadence's qualification for deferred recognition of certain proceeds received from restitution and settlement in connection with litigation during the period, according to Cadence's 10-Q filing for the most recently concluded quarter. The proposed tax deficiency for this item is approximately $152 million, the filing said.

An additional $172 million in tax deficiency claimed by the IRS is primarily related to proposed adjustments to transfer pricing arrangements that Cadence has with foreign subsidiaries and to the company's deductions for foreign trade income, the filing said.

Cadence is involved in an ongoing dispute with the IRS over a claimed tax deficiency of $124 million for 1997 through 1999, primarily related to price transfer pricing arrangements with its Irish subsidiary. Cadence said in the recent 10-Q that its protest over the tax adjustment for this period is still being considered by the Appeals Office of the IRS.

Cadence (San Jose, Calif.) said it intends to file a protest with the IRS over the $324 million for 2000 through 2002. Interest on the claimed $324 million will continue to accrue until the matter is resolved, Cadence said.

"Cadence believes that the proposed IRS adjustments are inconsistent with applicable tax laws, and that Cadence has meritorious defenses to the proposed adjustments," the filing said.

Synopsys Inc., Cadence's chief rival, remains involved in a dispute with the IRS over $476 million in back taxes. That dispute also centers on transactions between Synopsys and its Irish subsidiary.