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I. The Substantial Justification of Respondent's Position
Until her Appeals officer conceded the cases in response to
information not previously provided to the revenue agent,
respondent's position in this matter was that the unexplained
bank deposits to the accounts of Lawrence and Abraham represented
taxable income to each as computed in the notices of deficiency.
Whether respondent's position is substantially justified is
a question of fact. We resolve such issues by the application of
a reasonableness standard. See Pierce v. Underwood, 487 U.S. 552
(1988) (construing similar language in the Equal Access to
Justice Act, 28 U.S.C. sec. 2412 (1988)). In considering the
reasonableness of respondent's position, we take into account
what she knew at the time that she took the position based on the
information available to her at that time. See Rutana v.
Commissioner, 88 T.C. 1329, 1334 (1987).
Petitioners claim that, even without their cooperation,
Agent Red had the obligation to go further in his examinations.
They claim that Haddad had no more information than Agent Red did
and that she was able to satisfy respondent's Appeals officer
that the deposits in question did not represent taxable income to
either Abraham or Lawrence. Respondent argues that Agent Red was
entitled to ask for and receive explanations with respect to the
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