Roger L. and Patricia A. Lavallee - Page 13

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            petitioners satisfy the net worth requirements.  Respondent also                          
            concedes that petitioners substantially prevailed with respect to                         
            the amounts in controversy.                                                               
            Whether the Position of the United States was Substantially                               

                 Petitioners must prove that the position of the United                               
            States in this administrative proceeding was not substantially                            
            justified.  Sec. 7430(c)(4)(A)(i); Rule 232(e).  We apply the                             
            "not substantially justified" standard as of the date that                                
            respondent takes her position in the case.  For purposes of an                            
            administrative proceeding, respondent generally takes her                                 
            position on the date she issues the notice of deficiency.  Sec.                           
            7430(c)(7)(B); Han v. Commissioner, T.C. Memo. 1993-386.                                  
                 Whether respondent's position was "not substantially                                 
            justified" turns on an analysis of all the facts and                                      
            circumstances, as well as any relevant legal precedents.  Coastal                         
            Petroleum Refiners, Inc. v. Commissioner, 94 T.C. 685, 688                                
            (1990); Sher v. Commissioner, 89 T.C. 79, 84 (1987), affd. 861                            
            F.2d 131 (5th Cir. 1988); see also H. Rept. 97-404, at 12 (1981).                         
            We must consider the basis for respondent's position and the                              
            manner in which that position was maintained.  Wasie v.                                   
            Commissioner, 86 T.C. 962, 968-969 (1986).  A position is                                 
            substantially justified if the position is "justified to a degree                         

            proceedings commenced after July 30, 1996.                                                

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