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determination of fraud. In addition, it took 26 months following
the petition to file a stipulation of settled issues, and we held
that nothing in the record explained the Commissioner’s failure
to settle the case on a timely and fair basis.
In this case, the record establishes that respondent’s agent
conducted a thorough examination of petitioner’s horse activity
including, contrary to petitioner’s assertion, the 1993 and 1994
tax years. The revenue agent’s RAR also establishes that he
appropriately developed the applicable law. Further, although it
took about 2 years for respondent to concede the case, the record
indicates that such delay was not entirely attributable to
respondent. In part, petitioner contributed to the delay by
failing to attend scheduled meetings with respondent. Further,
respondent conceded the case after two attempts at settling the
case had failed. We do not think it was unreasonable for
respondent to attempt to reach a more favorable settlement prior
to conceding the deficiency.
Therefore, we hold that respondent has established that his
position in the administrative and litigation proceedings was
substantially justified because he acted reasonably given the
legal precedent and the circumstances surrounding petitioner’s
case. Accordingly, petitioner is not entitled to recover
administrative or litigation costs.
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Last modified: May 25, 2011