Laura E. Austin - Page 12

               The fact that respondent eventually loses or concedes the              
          case is not determinative as to whether the taxpayer is entitled            
          to an award of administrative or litigation costs.  Sokol v.                
          Commissioner, 92 T.C. 760, 767 (1989); Wasie v. Commissioner, 86            
          T.C. 962, 968-969 (1986).  It remains, however, a relevant factor           
          to consider in determining the degree of the Commissioner's                 
          justification.  Estate of Perry v. Commissioner, 931 F.2d 1044,             
          1046 (5th Cir. 1991); Powers v. Commissioner, supra at 470, 472.            
               Petitioner has the burden of establishing that respondent's            
          position was not substantially justified.  Rule 232(e); Dixson              
          Intl. Serv. Corp. v. Commissioner, 94 T.C. 708, 715 (1990).  For            
          petitioners to prevail, they must show that respondent's                    
          position, in fact as well as in law, was not justified to a                 
          degree that could satisfy a reasonable person.  The                         
          reasonableness of respondent's position and conduct necessarily             
          requires considering what respondent knew at the time.  Cf.                 
          Rutana v. Commissioner, 88 T.C. 1329, 1334 (1987); DeVenney v.              
          Commissioner, supra.  Thus, in determining whether respondent               
          acted reasonably, this Court must "consider the basis for                   
          respondent's legal position and the manner in which the position            
          was maintained."  Wasie v. Commissioner, supra at 969.                      
               In some cases courts have adopted an issue-by-issue approach           
          to section 7430, apportioning the requested awards between those            
          issues for which the respondent was, and those issues for which             
          respondent was not, substantially justified.  See Powers v.                 

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