- 10 -
The case principally relied on by respondent, Diebold, Inc.
v. United States, 891 F.2d 1579 (Fed. Cir. 1989), is
distinguishable on its facts and did not involve a question of
the adoption of a method of accounting in circumstances analogous
to those presented in the instant case.5 Furthermore,
petitioners' counsel informed respondent prior to trial of a
memorandum opinion of this Court (Evans v. Commissioner, T.C.
Memo. 1988-228) that held that a taxpayer did not adopt a method
of accounting where the taxpayer erroneously reported items of
income and did not consciously adopt the method. Respondent did
not attempt to distinguish, or even discuss, that case in the
posttrial briefs filed in the instant case. Moreover, as noted
in our opinion on the merits, petitioner's use of the cash method
to report the payments would have been contrary to the law
governing the taxation of guaranteed payments, and such a method
would not have been binding on petitioner even if he had adopted
it. Sicard v. Commissioner, T.C. Memo. 1996-173. Consequently,
we conclude that respondent's accounting method theory was
unreasonable and that therefore respondent's position in the
instant case was not substantially justified. Nalle v.
Commissioner, 55 F.3d at 191-193.
Respondent also objects to the date from which petitioners
calculated the COLA applicable to the award of attorney's fees
5 A revenue ruling relied on by respondent, Rev. Rul. 90-38,
1990-1 C.B. 57, is similarly distinguishable.
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