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Whether the position of the United States in this proceeding
was substantially justified depends on whether respondent's
positions and actions were reasonable in light of the facts of
the case and the applicable legal precedents. Sher v. Commis-
sioner, 89 T.C. 79, 84 (1987), affd. 861 F.2d 131 (5th Cir.
1988). The inquiry must be based on the facts reasonably avail-
able to respondent when the position was maintained. Coastal
Petroleum Refiners, Inc. v. Commissioner, 94 T.C. 685, 689
(1990).
In deciding this issue, we must identify the point in time
at which the United States is first considered to have taken a
position, and then decide whether the position taken from that
point forward was not substantially justified. Ordinarily,
respondent takes a litigating position on the date the answer to
the petition is filed. Huffman v. Commissioner, 978 F.2d 1139,
1148 (9th Cir. 1992), affg. in part and revg. in part on other
grounds and remanding T.C. Memo. 1991-144. Therefore, we begin
by reviewing the facts reasonably available to respondent on
March 24, 1995, the date she filed her answer to the amended
petition, in order to evaluate the reasonableness of respondent's
position. Id.
Respondent's position in this case was that petitioner held
50 acres of the Clayton property for business or investment, and
to that extent, the cost allocable to such use cannot be included
in petitioner's cost of purchasing a new residence. Respondent
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