Paul Frehe Enterprises, Inc. - Page 2

               After concessions by respondent, we must decide whether                
          respondent's litigating position was "not substantially                     
          justified", as that phrase is used in section 7430(c)(4)(A)(i).             
          If that question is resolved in favor of petitioner, then we must           
          decide whether the amount of costs and attorney's fees claimed by           
          petitioner is reasonable.                                                   
               All section references are to the Internal Revenue Code, and           
          all Rule references are to the Tax Court Rules of Practice and              
          Procedure.  References to section 7430 are to that section as               
          amended by section 1551 of the Tax Reform Act of 1986, Pub. L.              
          99-514, 100 Stat. 2752 (effective for proceedings commenced after           
          December 31, 1985), and by section 6239 of the Technical and                
          Miscellaneous Revenue Act of 1988, Pub. L. 100-647, 102 Stat.               
          3743-3746 (effective for proceedings commenced after November 10,           
               Section 7430(a) authorizes the Court to award reasonable               
          administrative costs and reasonable litigation costs to taxpayers           
          who prevail against the United States in civil tax litigation.              
          To obtain an award of litigation costs taxpayers must prove that            
          they are the "prevailing party" within the meaning of section               
          7430(c)(4), which requires, inter alia, that they establish that            
          the Commissioner's position in the proceeding was not                       
          substantially justified.                                                    
               The position taken by the United States, for purposes of               
          administrative costs, refers to the position taken in an                    

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