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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
(1987).
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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