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to the Commissioner. Coastal Petroleum Refiners, Inc. v.
Commissioner, 94 T.C. 685, 694-695 (1990).
Respondent has taken the position that petitioners have
failed to establish that they were actively engaged in the trade
or business of farming during the years in issue. Respondent
took this position in the administrative proceeding when the
statutory notice of deficiency was issued to petitioners on
February 29, 1996, sec. 7430(c)(7)(B), and in the court
proceeding when the answer to the petition was filed on July 26,
1996. We may consider the reasonableness of respondent's
position in the administrative proceeding separately from
respondent's position in the judicial proceeding. Huffman v.
Commissioner, 978 F.2d 1139, 1144-1147 (9th Cir. 1992), affg. in
part, revg. in part and remanding on another issue T.C. Memo.
1991-144. In this case, however, because the positions are the
same, we consider them in a single analysis.
Petitioners argue that respondent's position was not
substantially justified either in fact or in law. In
petitioners' view, the fact that the property was subject to the
CRP contract conclusively establishes that they were actively
engaged in the trade or business of farming for purposes of
section 162(a) during the years in issue. They point out that
the USDA and the Internal Revenue Service (IRS) are both agencies
of the United States and suggest that because the former agency
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