Mary Lee Sharer - Page 14

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                To qualify as the "prevailing party", the taxpayer must                      
          establish that (1) the position of the United States in the                        
          proceeding was not substantially justified; (2) the taxpayer                       
          substantially prevailed with respect to the amount in controversy                  
          or with respect to the most significant issue or set of issues                     
          presented; and (3) the taxpayer satisfies the applicable net                       
          worth requirements.  Sec. 7430(c)(4)(A).  Respondent concedes                      
          that petitioner meets the second and third criteria listed above.                  
          Respondent argues, however, that the position taken in both                        
          proceedings was substantially justified.  Rule 232(e); Dixson                      
          Corp. v. Commissioner, 94 T.C. 708, 714-715 (1990); Gantner v.                     
          Commissioner, 92 T.C. 192, 197 (1989), affd. 905 F.2d 241 (8th                     
          Cir. 1990).  Accordingly, the Court must decide, with respect to                   
          both cases, whether "the position of the United States in the                      
          proceeding was not substantially justified."  Gantner v.                           
          Commissioner, 905 F.2d at 245.                                                     
                In deciding this issue, the Court must first identify the                    
          point in time at which the United States is considered to have                     
          taken a position and then decide whether the position taken from                   
          that point forward was not substantially justified.  The "not                      
          substantially justified" standard is applied as of the separate                    
          dates that respondent took a position in the administrative                        
          proceeding as distinguished from the proceeding in this Court.                     
          Sec. 7430(c)(7)(A) and (B); Han v. Commissioner, T.C. Memo. 1993-                  





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