Danny K. Eldridge and Elma J. Eldridge - Page 4

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          Commissioner, supra.  The term "position of the United States" in           
          this context, see supra note 2, means the position taken by the             
          United States in a judicial proceeding.  Sec. 7430(c)(7)(A).                
               Respondent concedes that petitioners substantially prevailed           
          with respect to the amount in controversy and that petitioners              
          meet the net worth requirement.  Respondent also concedes that              
          petitioners exhausted their administrative remedies and that they           
          have not unreasonably protracted this proceeding.  However,                 
          respondent argues that her position was substantially justified.            
          If that question is resolved in favor of petitioners, there is a            
          further question as to the amount of the litigation costs.                  
          Whether Respondent's Position Was Substantially Justified                   
               A position is "substantially justified" when it is                     
          "justified to a degree that could satisfy a reasonable person."             
          Pierce v. Underwood, 487 U.S. 552, 565 (1988).  It is not enough            
          that a position simply has enough merit to avoid sanctions for              
          frivolousness; it must have a "reasonable basis both in law and             
          fact".  Id. at 564.  The burden of proving no substantial                   
          justification is on the taxpayers.  Rule 232(e); Estate of                  
          Johnson v. Commissioner, 985 F.2d 1315, 1318 (5th Cir. 1993);               
          Baker v. Commissioner, 83 T.C. 822, 827 (1984), vacated and                 
          remanded on other grounds 787 F.2d 637 (D.C. Cir. 1986).                    
               Whether the position of the United States in this proceeding           
          was substantially justified depends on whether respondent's                 
          positions and actions were reasonable in light of the facts of              

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