- 19 -
Respondent is correct in stating that Huffman approves of a
bifurcated analysis under section 7430, pursuant to which the two
stages of a case, the administrative proceeding and the court
proceeding, are considered separately. This bifurcated analysis:
not only ensures that the prevailing taxpayer is
reimbursed for pre-litigation and litigation costs, but
also supports Congress's intent that before an award of
attorney's fees is made, the taxpayer must meet the
burden of proving that the Government's position was
not substantially justified. It affords another
opportunity for the United States to reconsider an
inappropriate position. [Id. at 1146.]
Respondent's arguments on this point appear moot, however, as we
find no discernible difference between the administrative and
litigation positions she took in this matter.10 See Lennox v.
Commissioner, 998 F.2d 244, 247-249 (5th Cir. 1993) (holding that
the Government's position must be analyzed in the context of the
circumstances that caused it to take that position), revg. in
part and remanding T.C. Memo. 1992-382.
a. The DISC Issue
Petitioners contend that respondent was not substantially
justified in maintaining throughout the proceedings that
prohibited transactions had occurred with respect to IRA #1, and
by implication, IRA #2. We agree.
10
Respondent's administrative position for purposes of this
matter is that taken on June 29, 1992, the date of the notice of
deficiency. Sec. 7430(c)(2).
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