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Dr. Imhoff, indicating that petitioner received $4,147.50 of
income in 1991, and on an unsubstantiated assertion by Dr. Imhoff
that the $4,147.50 constituted nonemployee income. Respondent
did not obtain the necessary documentation from Dr. Imhoff and
petitioner until after the notice of deficiency was issued and
the answer was filed. Once respondent obtained the necessary
information, she had little difficulty confirming most of
petitioner's assertions. This process should have preceded the
issuance of the notice of deficiency.
Respondent argues that the parties have stipulated that "the
Commissioner was substantially justified in its [sic] position
that petitioner received income from a check of $703.50 in
January, 1991." Our determination, however, of whether
respondent was "substantially justified" within the meaning of
section 7430(c)(4)(A)(i) is based on the position respondent took
on August 9, 1994 (i.e., the date the notice of deficiency was
issued), and January 17, 1995 (i.e., the date respondent filed
her answer). See sec. 7430(c)(7)(A) and (B); Huffman v.
Commissioner, supra at 1143-1147. On both of these dates,
respondent's position was not substantially justified, because
she had an insufficient basis in fact to determine that
petitioner had received $4,147.50 of nonemployee income.
Portillo II, supra. Respondent did not take a position relating
to the $703.50 check until June or July of 1995, when she
received a copy of the check. The fact that respondent then took
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