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petition with the Court. After a brief trial on January 10,
2005, the Court determined that petitioners were engaged in a
trade or business. On March 14, 2005, the Court filed
petitioners’ motion for litigation and administrative costs. The
Court, on May 4, 2005, filed respondent’s response to
petitioners’ motion for litigation and administrative costs.
Discussion
Petitioners contend that they meet the requirements of
section 7430 and, thus, are entitled to recover litigation and
administrative costs. Respondent, however, contends that
petitioners failed to meet the requirements of section
7430(c)(4)(B) because respondent’s position was substantially
justified and petitioners failed to delineate sufficiently the
nature and amount of each item of cost.
The prevailing party in a Tax Court proceeding may recover
administrative or litigation costs. See sec. 7430(a); Rule 231.
Petitioners bear the burden of proving that they substantially
prevailed and meet each requirement of section 7430. Rule
232(e). Petitioners, however, will not be treated as the
prevailing party if respondent’s position was substantially
justified (i.e., had a reasonable basis in law and fact). Sec.
7430(c)(4)(B); see Pierce v. Underwood, 487 U.S. 552, 565 (1988).
Substantial justification is based upon respondent’s position on
the date he issued the notice of deficiency and after filing his
answer with this Court. Maggie Mgmt. Co. v. Commissioner, 108
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Last modified: May 25, 2011