Anita C. Human - Page 5

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          presented, and (2) meet the net worth requirements of 28 U.S.C.             
          sec. 2412(d)(2)(B).  Sec. 7430(c)(4)(A)(i) and (ii).  A taxpayer            
          will not be treated as a prevailing party, however, if the United           
          States establishes that its position was substantially justified.           
          Sec. 7430(c)(4)(B).                                                         
               As we stated earlier, respondent concedes that petitioner              
          substantially prevailed and met the net worth requirements.  The            
          parties primarily dispute, however, whether respondent's position           
          in both the administrative and judicial proceedings was                     
          substantially justified.                                                    
               Petitioner contends that respondent's position in both the             
          administrative and judicial proceedings was not substantially               
          justified.  Specifically, petitioner claims that before the                 
          issuance of the notice of deficiency, respondent knew or had                
          reason to know that the $750,000 received by petitioner in 1992             
          was in the nature of a property settlement incident to divorce              
          and thus, pursuant to section 1041, not includable in her gross             
          income.                                                                     
               Respondent asserts that it was reasonable to argue                     
          inconsistent positions against petitioner and Human in order to             
          protect the revenue.  The inconsistent positions were necessary,            
          respondent claims, because Human maintained that his payment to             
          petitioner in 1992 was alimony deductible by him and thus                   
          includable in petitioner's income.                                          





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