8
by the entirety property, and thereby resulted in "a one-hundred
percent (100%) win" for petitioners.
As discussed above, the issue in the underlying case was
whether Mr. Cox could deduct $18,000 of rental payments as an
ordinary expense and whether Mrs. Cox was required to report the
same $18,000 as passive rental income. Respondent denied the
amount in full, both as an expense for Mr. Cox and as income to
Mrs. Cox, while petitioners argued that they were entitled to the
full amounts as claimed and reported on their 1987 joint Federal
income tax return. We determined that Mr. Cox was entitled to
deduct one-half, or $9,000, of the rental payments while Mrs. Cox
was required to report the same amount as rental income. In so
doing, we stated: "We think that both petitioners and respondent
are incorrect in their treatment of this item. Both, we believe,
have elevated form over reality." Cox v. Commissioner, supra.
Accordingly, petitioners did not achieve a "100 percent win"
in the underlying case. Rather, if we were grading our decision
on a percentage scale, the results would be closer to 50 percent
for petitioners and 50 percent for respondent. Therefore, it is
questionable whether petitioners substantially prevailed with
respect to the amount in controversy or the most significant
issue or set of issues presented.
Even assuming, arguendo, that petitioners did substantially
prevail in the underlying case, we conclude that they would not
be entitled to litigation costs because respondent's position was
substantially justified. Petitioners argue that the position of
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