-5-
addition to tax pursuant to section 6661 for substantial
understatement of tax.
Discussion
A taxpayer who substantially prevails in an administrative
or court proceeding may be awarded a judgment for reasonable
costs incurred in such proceedings. Sec. 7430(a)(1) and (2). A
taxpayer has the burden of proving that it meets each requirement
before we may order an award of costs under section 7430. Rule
232(e); Gantner v. Commissioner, 92 T.C. 192, 197 (1989), affd.
905 F.2d 241 (8th Cir. 1990).
For this Court to award reasonable litigation costs under
section 7430, several requirements must be met. The record must
show that: (1) The moving party did not unreasonably protract
the administrative proceeding or the proceeding in this Court.
Sec. 7430(b)(4). (2) The moving party exhausted any
administrative remedies available to him or her in the Internal
Revenue Service. Sec. 7430(b)(1). Respondent concedes that
petitioner satisfies these first two requirements. (3) The
moving party was the prevailing party. Sec. 7430(a). As
discussed below, we find that petitioner has met this
requirement.
Whether Petitioner Is the Prevailing Party
A taxpayer must satisfy several conjunctive requirements to
be deemed a prevailing party. Sec. 7430(c). The taxpayer must
establish: (1) The position of the United States in the civil
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