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Petitioner contends that respondent's position in both the
administrative and litigation proceedings was not substantially
justified. Specifically, petitioner claims that prior to the
issuance of the notice of deficiency, respondent knew or had reason
to know that a substantial portion of the bank deposits came from
nontaxable sources, most notably nontaxable child care payments or
property settlement proceeds. Petitioner further claims that the
IRS lost or destroyed much of the evidence supporting these facts,
thus forcing petitioner to prove her case again.
Disagreeing with petitioner, respondent asserts that from the
district counsel's first involvement in this matter, diligent and
reasonable efforts were made to verify petitioner's claims.
Respondent further claims that the IRS's activity prior to district
counsel's involvement is irrelevant in determining whether
petitioner is entitled to reasonable litigation and administrative
costs.
For the reasons set forth below, we shall deny petitioner's
motion for award of litigation and administrative costs.
Respondent generally takes a position in a judicial proceeding
upon the filing of the answer to the petition. 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. Respondent takes a position in an administrative proceeding
as of the earlier of the date the taxpayer receives an IRS Appeals
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