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Petitioners bear the burden of proving that each of the
foregoing requirements has been satisfied.2 Rule 232(e). The
requirements are conjunctive, and failure to prove any one will
preclude an award of costs to petitioners. Minahan v.
Commissioner, 88 T.C. 492, 497 (1987).
Respondent contends that petitioners have not shown that the
position of the United States was not substantially justified and
that the amount of attorney's fees claimed is not reasonable
because the applicable cost of living adjustment (COLA) was
improperly calculated. Respondent concedes that petitioners have
satisfied the other requirements for the award of reasonable
administrative and litigation costs. We shall first consider
whether respondent's position was substantially justified.
A position is substantially justified if it is justified to
a degree that could satisfy a reasonable person and has a
reasonable basis in both fact and law. Pierce v. Underwood, 487
U.S. 552, 565 (1988); Nalle v. Commissioner, 55 F.3d 189, 191
(5th Cir. 1995), affg. T.C. Memo. 1994-182; Swanson v.
Commissioner, 106 T.C. 76, 86 (1996). The determination of
reasonableness is based on all of the facts and circumstances
surrounding the proceedings. Nalle v. Commissioner, supra at
2 Because the relevant proceedings in the instant case were
commenced prior to the date of enactment of the Taxpayer Bill of
Rights 2, Pub. L. 104-168, sec. 701, 110 Stat. 1452, 1463 (1996),
respondent does not bear the burden of proving that the position
of the United States was substantially justified.
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