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OPINION
General Principles--Substantially justified
Section 7430(a)(2), subject to certain limitations not
relevant here, generally allows a taxpayer that files a petition
in this Court to recover reasonable litigation costs incurred
with respect to the determination of any tax or penalty, provided
the taxpayer is the "prevailing party". To be considered a
"prevailing party" a taxpayer must establish, inter alia, that
the position of the United States was "not substantially
justified".4 Sec. 7430(c)(4)(A)(i).
The fact that the Commissioner ultimately concedes all or
part of a case is not sufficient to establish that the
Commissioner's position was unreasonable in an administrative or
civil tax proceeding. Sokol v. Commissioner, 92 T.C. 760, 765-
767 (1989); Sher v. Commissioner, 89 T.C. 79, 87 (1987), affd.
4 In 1986, Congress amended sec. 7430 by replacing the term
"unreasonable" with the phrase "not substantially justified".
Tax Reform Act of 1986, Pub. L. 99-514, sec. 1551, 100 Stat.
2752. This change was effected to conform sec. 7430 more closely
with the Equal Access to Justice Act (EAJA), 28 U.S.C. sec. 2412
(1988). H. Conf. Rept. 99-841, at 799, 801 (1986), 1986-3 C.B.
(Vol. 4) 1, 799, 801. In the context of the EAJA, the Supreme
Court has interpreted the phrase "not substantially justified" to
mean "justified to a degree that could satisfy a reasonable
person." Pierce v. Underwood, 487 U.S. 552, 565 (1988). This
Court has consistently held that the "substantially justified"
standard is not a departure from the "reasonableness" standard.
See, e.g., Sher v. Commissioner, 89 T.C. 79, 84 (1987), affd. 861
F.2d 131 (5th Cir. 1988).
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Last modified: May 25, 2011