John E. and Concetta Lozon - Page 9

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          arguments presented by respondent that were not addressed and               
          rejected in Butts and Mosteirin I.  Additionally, no factual                
          controversy remained after Mosteirin I.  Respondent knew, and               
          indeed agreed, that the facts were indistinguishable from the               
          prior Allstate cases.  Given that these facts were available to             
          respondent, legal precedents did not substantially support                  
          respondent's position.                                                      
               Furthermore, we do not agree that it was necessary for                 
          respondent to try the pension and self-employment tax issues                
          together with the classification issue.5                                    
               It is time for respondent to suffer the consequences of                
          continually advocating a position previously judicially                     
          disapproved.  We conclude that respondent's position regarding              
          the classification issue was not substantially justified.6                  

               5  We do not find convincing respondent's bald assertion               
          that it was necessary.                                                      
               6  Respondent also argues that the Government was                      
          substantially justified in litigating the classification issue              
          because the Court correctly articulated the applicable legal                
          standard in Butts v. Commissioner, T.C. Memo. 1993-478, affd. per           
          curiam 49 F.3d 713 (11th Cir. 1995), and Smithwick v.                       
          Commissioner, T.C. Memo 1993-582, affd. per curiam sub nom. Butts           
          v. Commissioner, 49 F.3d 713 (11th Cir. 1995), as one of the                
          right to control the insurance agency, but we did not correctly             
          apply the legal test to the NOA's in those two cases.                       
          Respondent's argument relies on our statement in Lozon I that               
          respondent was half right.  Respondent understands this statement           
          to mean that the Court agreed that we misapplied the test.                  
          Respondent is mistaken.  In stating that respondent was half                
          right, we meant that respondent was correct in noting that the              
          Court articulated the applicable legal standard, but was                    
          incorrect in asserting that we misapplied the test.  Thus,                  
                                                             (continued...)           




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