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decision or the date of the notice of deficiency. Sec.
7430(c)(7)(B). In Egan v. Commissioner, 91 T.C. 705, 711 (1988),
and Sher v. Commissioner, 89 T.C. 79, 86 (1987), affd. 861 F.2d 131
(5th Cir. 1988), we held that the Court may only consider
respondent's position and actions after the involvement of district
counsel. These cases were legislatively superseded by section
7430(c)(7). Brice v. Commissioner, T.C. Memo. 1990-355, affd.
without published opinion 940 F.2d 667 (9th Cir. 1991).
Respondent's position is substantially justified if that
position could satisfy a reasonable person and if it has a
reasonable basis in both fact and law. Pierce v. Underwood, 487
U.S. 552, 565 (1988); Swanson v. Commissioner, 106 T.C. 76, 86
(1996). We examine the facts known to respondent at the time the
position was taken. Coastal Petroleum Refiners, Inc. v.
Commissioner, 94 T.C. 685, 689 (1990). The fact that respondent
eventually loses or concedes a case is not determinative of whether
petitioner is entitled to reasonable litigation and administrative
costs. Sokol v. Commissioner, 92 T.C. 760, 767 (1989).
We first consider whether respondent's position during the
administrative proceeding was substantially justified.
Respondent's position in the administrative proceeding was first
established with the issuance of the notice of deficiency, dated
February 15, 1996. The notice stated that petitioner's taxable
income was being increased by the amount of bank deposits at City
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