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substantially prevailed with respect to the amount in controversy
or with respect to the most significant issue or set of issues
presented, and (3) the taxpayer satisfies the applicable net
worth requirements. Sec. 7430(c)(4)(A). Respondent concedes
that petitioners meet the second and third criteria listed above;
however, respondent contends that the position taken in both the
administrative and litigation aspects of the proceedings was
substantially justified. Rule 232(e); Dixson Corp. v.
Commissioner, 94 T.C. 708, 714-715 (1990); Gantner v.
Commissioner, 92 T.C. 192, 197 (1989), affd. 905 F.2d 241 (8th
Cir. 1990). Accordingly, the issue is whether "the position of
the United States in the proceeding was not substantially
justified." Gantner v. Commissioner, 905 F.2d at 245.
In deciding this issue, the Court must first identify the
point at which the United States is considered to have taken a
position and then decide whether the position taken from that
point forward was not substantially justified. The "not
substantially justified" standard is applied as of the separate
dates that respondent took a position in the administrative
4(...continued)
proving that the Commissioner's position in the administrative
proceeding and the proceeding in this Court was substantially
justified. However, the provisions of TBOR 2 are effective only
with respect to proceedings commenced after July 30, 1996. The
provisions of TBOR 2 do not apply to this case because
petitioners filed their petition on Aug. 14, 1995. See Maggie
Management Co. v. Commissioner, 108 T.C. 430, 441 (1997).
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