Simpson Financial Services, Inc. - Page 8

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          that they exhausted their administrative remedies within the                
          meaning of section 7430(b)(1);3 that they did not unreasonably              
          protract the proceedings within the meaning of section                      
          7430(b)(4); and that their claimed costs are reasonable, sec.               
          7430(c)(1) and (2).  These requirements are in the conjunctive.             
          Minahan v. Commissioner, 88 T.C. 492, 497 (1987).  Petitioners              
          must prove each and every requirement.  Rule 232(e); Welch v.               
          Helvering, 290 U.S. 111, 115 (1933); Nalle v. Commissioner, 55              
          F.3d 189, 191 (5th Cir. 1995), affg. T.C. Memo. 1994-182; Lennox            
          v. Commissioner, 998 F.2d 244, 248 (5th Cir. 1993), revg. in part           
          T.C. Memo. 1992-382; Gantner v. Commissioner, 92 T.C. 192, 197              
          (1989), affd. 905 F.2d 241 (8th Cir. 1990).                                 
               Respondent agrees that petitioners have met all of the above           
          requirements except two.  Respondent disputes petitioners'                  
          contention that her position was not substantially justified, and           
          respondent argues that some of petitioners' claimed costs are not           
          reasonable.                                                                 
          2. Whether Respondent's Position was Substantially Justified                
               Whether respondent's position was substantially justified              
          turns on a finding of reasonableness, based on all the facts and            
          circumstances of the case, as well as any legal precedents which            
          may relate thereto.  Wilkerson v. United States, supra at 119;              
          Nalle v. Commissioner, supra at 191; Coastal Petroleum Refiners,            

               3 This requirement only applies to an award of reasonable              
          litigation costs.  Sec. 7430(b)(1).                                         




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