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e. Whether Respondent's Desire to Have a Trial Bars an
Award of Litigation Fees
Respondent contends that trial was needed so respondent
could assess the probative value, admissibility of testimony and
documents offered by petitioner to prove its business needs.
For example, respondent wanted to assess Arnold Saltzman's
credibility at trial. Respondent argues that until respondent
conceded the accumulated earnings tax issues, respondent's
litigating position was substantially justified because this case
could only be resolved by examining the facts and circumstances,
including assessing the credibility of the witnesses. We
disagree. The Government is not automatically excused from
having a reasonable basis in fact in cases where facts and
witnesses' credibility are in dispute.
Respondent cites Richman v. Commissioner, T.C. Memo. 1994-
140 for the proposition that respondent's position is
substantially justified where the issues are factual and depend
on a determination of credibility. This is not what we held
in Richman. In Richman, the Commissioner determined that the
taxpayer fraudulently omitted interest income. We held that
the Commissioner had a reasonable basis in fact because, when
respondent issued the notice of deficiency, respondent knew that
the taxpayer used an incorrect Social Security number on his
account statements, and the account statements contained a notice
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