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to persuade the trier of fact does not necessarily mean that the
Commissioner's position did not have a reasonable basis in fact,
Gantner v. Commissioner, 92 T.C. 192, 198 (1989), affd. 905 F.2d
241 (8th Cir. 1990), unless that evidence is unusually scanty or
unworthy of belief, VanderPol v. Commissioner, 91 T.C. 367, 370
(1988). The Commissioner cannot escape an award of costs
pursuant to section 7430 simply because a case presents questions
of fact, Minahan v. Commissioner, supra at 500-502, or of witness
credibility, Windsor Prod. Corp. v. Commissioner, T.C. Memo.
1995-556. A position is not substantially justified in law if
legal precedent does not substantially support the Commissioner's
position given the facts available to the Commissioner. Coastal
Petroleum Refiners, Inc. v. Commissioner, supra at 688.
Respondent's position, which was stated in the notice of
deficiency, was that petitioners' horse activity was an activity
not entered into for profit. In the answer, respondent denied
certain of petitioners' allegations.
Petitioners contend that respondent's position was not
substantially justified because: (1) Respondent failed to
exercise reasonable and appropriate discretion to resolve this
action without a court proceeding, (2) respondent did not conduct
any pretrial discovery, (3) respondent relied on the presumption
of correctness accorded the determination in the notice of
deficiency and did not present any evidentiary or legal support
for respondent's position, (4) the Court found no support for
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