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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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