-18-
Cir. 1991). In sum, we hold that respondent's position in the
administrative proceeding, i.e., issuance of the notice of
deficiency, was substantially justified.
Respondent's position in the judicial proceeding also was
substantially justified. As of the date she filed the answer (July
22, 1994), respondent had not received any further information from
petitioners. It was reasonable for respondent's answer to reassert
the position taken in the notice of deficiency. Petitioners had to
prove that the discharge of indebtedness did not create gross
income. Rule 142(a). However, as of July 22, 1994, they had not
developed the facts necessary to show that either section
108(a)(1)(B) or (e)(5) applied. It was not until February 1995
that petitioners more fully presented their case. At that time,
respondent's counsel reevaluated the case, weighing the evidence
presented as well as the costs of litigation. After reviewing the
additional information offered by petitioners, respondent's counsel
expeditiously conceded the case. Having considered all the
evidence before us, we hold that there was sufficient doubt as to
the applicability of the mutually exclusive section 108(a)(1)(B)
and (e)(5) to substantially justify the position taken by
respondent in both the notice of deficiency and the answer.
Petitioners have failed to prove that respondent's position was not
substantially justified.
The fact that the Commissioner eventually loses or concedes a
case is not sufficient to establish that a position is not
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