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administrative and litigation costs. To be a prevailing party
under section 7430(c)(4), the party seeking such award must: (1)
Establish that the position of the United States in the
proceeding was not substantially justified, sec. 7430(c)
(4)(A)(i); (2) substantially prevail with respect to the amount
in controversy, or have substantially prevailed with respect to
the most significant issue or set of issues presented, sec.
7430(c)(4)(A)(ii); and (3) establish that the party had the
requisite net worth at the time the proceeding was commenced,
sec. 7430(c)(4)(A)(iii).
Additionally, a judgment for administrative and litigation
costs will not be awarded under section 7430(a) unless the Court
determines: (1) That the prevailing party has exhausted the
administrative remedies available within the Internal Revenue
Service (Service), sec. 7430(b)(1); and (2) that the prevailing
party has not unreasonably protracted the Court proceeding, sec.
7430(b)(4). See Bragg v. Commissioner, 102 T.C. 715, 717 (1994);
Polyco, Inc. v. Commissioner, 91 T.C. 963, 966-967 (1988).
Respondent agrees that petitioners substantially prevailed
in the underlying actions, met the net worth requirement, have
not unreasonably protracted the Court proceeding, and have
exhausted their administrative remedies. Thus, we focus our
analysis on considering whether respondent's position was
substantially justified.
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