Anita C. Human - Page 7

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          reasonable basis in both fact and law.  Pierce v. Underwood, 487            
          U.S. 552, 565 (1988); Swanson v. Commissioner, 106 T.C. 76, 86              
          (1996).  We examine the facts known to the Commissioner at the              
          time the position was taken.  Coastal Petroleum Refiners, Inc. v.           
          Commissioner, 94 T.C. 685, 689 (1990).  The fact that the                   
          Commissioner eventually loses or concedes a case is not                     
          determinative of whether a taxpayer is entitled to reasonable               
          litigation and administrative costs.  Sokol v. Commissioner, 92             
          T.C. 760, 767 (1989).                                                       
                    Administrative Proceeding                                         
               We first consider whether respondent's position during the             
          administrative proceeding was substantially justified.  The sole            
          issue involved in the administrative proceeding was whether the             
          $750,000 payment petitioner received in 1992 from Human was                 
          periodic alimony under Georgia law, thereby includable in her               
          income, or lump-sum alimony under Georgia law and thus excludable           
          from her income.                                                            
               On August 10, 1995, shortly after the IRS initiated an                 
          examination of petitioner's 1992 return, one of petitioner's                
          attorneys met with Merlon Harper (Harper), the IRS agent                    
          conducting the examination.  During that meeting, petitioner's              
          attorney explained that the $750,000 payment received from Human            
          was in the nature of a property settlement and not includable in            
          her income.  In addition, petitioner's attorney submitted a legal           





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