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The Court must "consider the basis for respondent's legal
position and the manner in which the position was maintained".
Wasie v. Commissioner, 86 T.C. 962, 969 (1986). The fact that
respondent eventually loses or concedes the case does not
establish an unreasonable position. Sokol v. Commissioner, 92
T.C. 760, 767 (1989); Baker v. Commissioner, 83 T.C. 822, 828
(1984), vacated on other issues 787 F.2d 637 (D.C. Cir. 1986).
The reasonableness of respondent's position and conduct
necessarily requires considering what respondent knew at the
time. Cf. Rutana v. Commissioner, 88 T.C. 1329, 1334 (1987);
DeVenney v. Commissioner, 85 T.C. 927, 930 (1985). The taxpayer
has the burden of establishing that respondent's position was
unreasonable. Rule 232(e).
At all relevant times, respondent's position in both of
petitioner's cases was that, using the bank deposits method,
respondent properly calculated, in the notices of deficiency,
petitioner's income tax for 1988 and 1989. Petitioner argues
that respondent's position was not reasonable as a matter of law
or fact. As a matter of law, petitioner argues that respondent's
use of the bank deposits method, an indirect method in
determining petitioner's taxable income, was not reasonable.
This Court has long held that the bank deposits method of
determining taxable income is reasonable when, as in the present
case, taxpayers fail to maintain, or submit for examination by
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