- 14 -
taken until the date the notice of deficiency was issued. The
documentary evidence provided to the Internal Revenue before the
issuance of the deficiency notice was insufficient.
In Lennox v. Commissioner, 998 F.2d 244 (5th Cir. 1993),
revg. in part T.C. Memo. 1992-382, the Fifth Circuit Court of
Appeals held that, in determining whether respondent's position
is substantially justified on the date of issuance of the notice
of deficiency under section 7430(c)(7)(B)(ii), the position must
be analyzed in the context of what caused respondent to take the
position set out in the notice of deficiency. The Court
reiterated the holdings in Pierce v. Underwood, supra, and Powers
v. Commissioner, supra, that respondent's position is
substantially justified if the position is "justified to a degree
that could satisfy a reasonable person". However, the Court
noted that respondent's position is not substantially justified
if, at the time the notice of deficiency is issued, respondent
had merely a "suspicion" of the taxpayer's liability, and the
opportunity existed for further investigation.
In this case, respondent had a great deal more than a
suspicion of petitioner's liability at the time the notice of
deficiency was issued. Respondent had received credible third-
party information from payers that petitioner had been the
recipient of income during 1992 that he had not reported.
Respondent's records reflected that petitioner had not filed a
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011