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case until petitioner provides the necessary documentation to prove
petitioner's contentions. See Brice v. Commissioner, supra.
In sum, we find that respondent's position during the
administrative proceeding was substantially justified.
We now turn our attention to whether respondent's position in
the judicial proceeding was substantially justified. Respondent's
position in the judicial proceeding first occurred with the filing
of an answer to petitioner's petition on or about June 24, 1996.
The position taken in respondent's answer was the same as in the
notice of deficiency; i.e., respondent sought verification and
corroboration of petitioner's bank deposit sources.
Because no new information was received between the time the
notice of deficiency was issued (February 15, 1996) and the time
the answer was filed (June 24, 1996), respondent's position in the
answer was reasonable. See Brantley v. Commissioner, T.C. Memo.
1995-564. Moreover, respondent made diligent efforts to resolve
this case, contacting petitioner regarding settlement discussions
within 1 month of filing the answer. One reason why settlement may
not have been reached sooner than it was (in April 1997) was
because of petitioner's request for additional time to complete her
own bank deposit analysis and to gather more information from the
Government.
After the notice of deficiency is issued, respondent may
through district counsel independently verify a taxpayer's claims
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