James H. Swanson and Josephine A. Swanson - Page 17

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          Furthermore, respondent asserts that petitioners:  (1) Have not             
          satisfied the net worth requirements, (2) failed to exhaust the             
          administrative remedies available to them within the Internal               
          Revenue Service, (3) unreasonably protracted the proceedings, and           
          (4) have not shown that the costs they have claimed are                     
          reasonable.  We will address each contested point in turn.                  
               1. Whether Respondent's Litigation Position Was                        
          Substantially Justified                                                     
               In 1986, Congress amended section 7430 to conform that                 
          provision more closely to the Equal Access to Justice Act                   
          (EAJA).  Tax Reform Act of 1986, Pub. L. 99-514, sec. 1551, 100             
          Stat. 2085, 2752.  Where the prior statute required taxpayers to            
          prove that the Government's position in a proceeding was                    
          "unreasonable," the statute as amended now requires a showing               
          that the position of the United States was "not substantially               
          justified."  Sec. 7430(c)(4)(A)(i).  This Court has concluded               
          that the substantially justified standard is essentially a                  
          continuation of the prior law's reasonableness standard.  Sher v.           

          7(...continued)                                                             
          substantially justified in this matter should be based, in part,            
          on the outcome of a related case involving IRA #1.  In docket No.           
          21109-92, respondent determined, and IRA #1 ultimately conceded,            
          that IRA #1 had unrelated business income for the taxable year              
          1988.  IRA #1's concession in docket No. 21109-92, however,                 
          appears to have been a direct result of respondent's filing her             
          notice of no objection to petitioners' motion for summary                   
          judgment in this case.  In any event, we give no weight to the              
          outcome of docket No. 21109-92 because it resulted from an                  
          agreement between the parties to that docket rather than a                  
          judicial determination.                                                     




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