11
4. Show that the taxpayer did not unreasonably protract
the proceedings. Sec. 7430(b)(3). Respondent concedes that
petitioner meets this requirement.
5. Establish that the amounts of costs and attorney's fees
claimed by the taxpayer are reasonable. Sec. 7430(a), (c)(1) and
(2). Respondent disputes the number of hours of legal services
claimed by petitioner. Petitioner also claimed that it was
entitled to more than $110 per hour adjusted for inflation.
Respondent disputes that contention.
For proceedings beginning after July 30, 1996, the taxpayer
is not entitled to an award for reasonable administrative and
litigation costs if the Commissioner shows that the position of
the United States in the action was substantially justified.
Sec. 7430(c)(4)(B)(i). Respondent bears the burden of proving
that respondent's position was substantially justified. Id.
Respondent contends that respondent has made this showing.
B. Position of the United States and Substantially Justified
Standard
1. Position of the United States
The Commissioner takes a position in an administrative
proceeding as of the earlier of the date the taxpayer receives an
Internal Revenue Service (IRS) Appeals decision or the
Commissioner sends the notice of deficiency. Sec. 7430(c)(7)(B).
Respondent's position in the administrative proceeding was
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