Laura E. Austin - Page 11

          deductions for research and development of computer software, and           
          most significantly, that ASAP's use of the cash method of                   
          accounting did not yield a clear reflection of income.                      
               Whether respondent's position was not substantially                    
          justified turns on a finding of reasonableness, based upon all              
          the facts and circumstances, as well as legal precedents relating           
          to the case.  Pierce v. Underwood, 487 U.S. 552 (1988); Coastal             
          Petroleum Refiners, Inc. v. Commissioner, supra at 694-695; Sher            
          v. Commissioner, 89 T.C. 79, 84 (1987), affd. 861 F.2d 131 (5th             
          Cir. 1988); DeVenney v. Commissioner, 85 T.C. 927, 930 (1985).  A           
          position is substantially justified if the position is "justified           
          to a degree that could satisfy a reasonable person."  Pierce v.             
          Underwood, supra at 565; Powers v. Commissioner, 100 T.C. 457,              
          470-471 (1993).  A position that merely possesses enough merit to           
          avoid sanctions for frivolousness will not satisfy this standard;           
          rather it must have a "reasonable basis both in law and fact."              
          Pierce v. Underwood, supra at 564-565.  A position is not                   
          substantially justified in law if legal precedent does not                  
          substantially support the Commissioner's position given the facts           
          available to the Commissioner.  Coastal Petroleum Refiners, Inc.            
          v. Commissioner, supra at 688.  The Commissioner cannot escape an           
          award for costs pursuant to section 7430 simply because a case              
          presents a question of fact.  Minahan v. Commissioner, 88 T.C.              
          492, 500-502 (1987).                                                        

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