- 15 -
that the amount of interest would be reported to the Internal
Revenue Service. Id.
Respondent contends that respondent was substantially
justified in asserting the accumulated earnings issue because
petitioner did not provide documents relevant to that issue in
its protest letter dated May 15, 1991. We disagree. Respondent
first proposed to assert the accumulated earnings issue in August
1991. It is unreasonable to fault petitioner for not
anticipating that respondent would raise the accumulated earnings
issue later.
Respondent contends that petitioner acknowledged the need
for trial in its motion to shift the burden of proof to
respondent. We disagree; petitioner's motion to shift the burden
of proof did not state that trial was needed. Rather, petitioner
asserted that respondent should bear the burden of proof if the
matter went to trial.
Respondent contends that petitioner admitted that trial
was needed by proposing 65 findings of fact after trial. We
disagree. Petitioner properly proposed findings of fact in its
posttrial brief. This has no bearing on whether respondent's
position was substantially justified.
Respondent argues that respondent's position was
substantially justified because
In response to discovery, petitioners represented
that they had produced all documents establishing the
allegations in their petition; but in fact not all of
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