Deborah A. Cole - Page 8

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          requirements will preclude an award of costs.  Minahan v.                   
          Commissioner, 88 T.C. 492, 497 (1987).  For the reasons discussed           
          below, we conclude that petitioner is entitled to recover                   
          administrative and litigation costs.                                        
               Respondent has conceded that petitioner has substantially              
          prevailed and that she meets the net worth requirement.  We                 
          address the remaining requirements of section 7430 in turn.                 
          I.   Substantial Justification                                              
               Respondent's position is substantially justified if the                
          position was justified to a degree that would satisfy a                     
          reasonable person.  Pierce v. Underwood, 487 U.S. 552, 565                  
          (1988); Lenox v. Commissioner, 998 F.2d 244, 248 (5th Cir. 1993),           
          revg. in part T.C. Memo. 1992-382.  To meet this standard,                  
          respondent's position must have a basis in fact and law.  Pierce            
          v. Underwood, supra; Lenox v. Commissioner, supra.                          
               To recover administrative and litigation costs, petitioner             
          must prove that respondent's positions in both the administrative           
          proceeding and the proceeding in this Court were not                        
          substantially justified.  Sec. 7430(c)(4)(A)(i), (7)(A) and (B);            
          Huffman v. Commissioner, 978 F.2d 1139, 1143-1147 (9th Cir.                 
          1992), affg. in part, revg. in part on other grounds and                    
          remanding T.C. Memo. 1991-144; Stieha v. Commissioner, 89 T.C.              
          784, 790 n.5 (1987).  This "not substantially justified" standard           
          under section 7430 is applied as of the separate dates respondent           
          took positions in the administrative proceeding and the                     




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