Open the Tools->Options
Under Source Control -> Visual Studio Team Foundation Server, click on the “Configure User Tools” button.
If you don’t see any extensions being setup, add extensions using the following method:
Click on the Add button.
Specify extension with the dot. For example “.cs” without quotes.
Select operation as “Compare”.
Select command as C:\Program Files\Microsoft Visual Studio 9.0\Common7\IDE\diffmerge.exe
The command location depends on where you installed and which version of Visual Studio you are using. Just lookup for the diffmerge.exe. On a 64 bit Windows the file is located under x86 program files folder.
Set the arguments to %1 %2 %6 %7 %5 /ignorespace
Note: This doesn’t ignore blank lines added or removed.
You are set for comparing files ignoring white space.
Add additional extensions.