106 T.C. No. 3
UNITED STATES TAX COURT
JAMES H. SWANSON AND JOSEPHINE A. SWANSON, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 21203-92. Filed February 14, 1996.
Ps filed a motion for reasonable litigation costs
pursuant to Rule 231, Tax Court Rules of Practice and
Procedure, and sec. 7430, I.R.C., claiming that R was
not substantially justified in determining that: (1)
Prohibited transactions had occurred under sec. 4975,
I.R.C., with respect to a domestic international sales
corporation, a foreign sales corporation, and two
individual retirement accounts; and (2) the sale of Ps'
Illinois residence to P's closely held corporation was
a sham transaction.
1. Held: R was not substantially justified with
respect to the first issue, but was substantially
justified with respect to the second issue.
2. Held, further, net worth, for purposes of the
Equal Access to Justice Act, 28 U.S.C. sec.
2412(d)(2)(B) (1994), as incorporated by sec.
7430(c)(4)(A)(iii), is determined based upon the cost
of acquisition rather than the fair market value of
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