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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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