John F. and Tracy L. Barford, et al. - Page 6

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          unreasonably protract the proceedings, and that the costs                   
          claimed are reasonable.  Sec. 7430(b) and (c).  Petitioners must            
          establish all of these conjunctive elements in order to recover             
          litigation costs.  Minahan v. Commissioner, 88 T.C. 492, 497                
               Respondent agrees that petitioners have: (1) Substantially             
          prevailed in this case, (2) exhausted the administrative                    
          remedies available to them within the Internal Revenue Service,             
          and (3) not unreasonably protracted the Court proceeding.                   
          Respondent also agrees that respondent had taken a position that            
          was not substantially justified on the issue of the valuation of            
          RAM Drilling stock.  However, respondent contends that                      
          respondent's position regarding the imputation of interest                  
          income under section 482 was substantially justified.                       
          Respondent further contends petitioners have not met the net                
          worth requirements, and that the costs claimed are unreasonable.            
               We first consider whether petitioners have established that            
          the position of the United States was not substantially                     
          justified.  Sec. 7430(c)(4)(A)(i).  This Court has held that the            
          substantially justified standard is the same as the                         
          reasonableness standard.  Sher v. Commissioner, 89 T.C. 79, 84              
          (1987), affd. 861 F.2d 131 (5th Cir. 1988).  The determination              
          of reasonableness must be based upon all the facts and                      
          circumstances surrounding the proceeding.  Wasie v.                         

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