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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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