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(1994) (as in effect on the date of the enactment of the Tax
Reform Act of 1986, Pub. L. 99-514, sec. 1551(h)(3), 100 Stat.
2085, 2753) (sec. 7430(c)(4)(A)(iii)).
Courts will not award litigation costs under section 7430(a)
unless a prevailing party has exhausted the administrative
remedies available to such party with the IRS. Sec. 7430(b)(1).
Moreover, no award for reasonable administrative or litigation
costs may be made with respect to any portion of the civil
proceeding during which a prevailing party has "unreasonably
protracted" such proceeding. Sec. 7430(b)(4).
In the instant case, respondent agrees that petitioner has:
(1) Substantially prevailed with respect to the amount in
controversy; (2) exhausted the administrative remedies available
to it; (3) not unreasonably protracted the proceedings; and (4)
shown that the net worth and number of employees requirements
have been met. Respondent contends, however, that her position
was substantially justified so that petitioner is not a
prevailing party for purposes of section 7430. In the
alternative, respondent argues the amount of administrative and
litigation costs claimed by petitioner is unreasonable.
Since petitioner's motion for costs was filed prior to the
enactment of the Taxpayer Bill of Rights 2, Pub. L. 104-168, sec.
701, 110 Stat. 1452, 1463 (1996), it bears the burden of proving
that respondent's position in the proceedings was not
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