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proceeding and in the proceeding in this Court. Sec.
7430(c)(7)(A) and (B); Han v. Commissioner, T.C. Memo. 1993-386.
For purposes of the administrative proceeding, respondent took a
position on May 19, 1995, the date of the notices of deficiency.
Sec. 7430(c)(7)(B).5 For purposes of the proceeding in this
Court, respondent took a position on October 13, 1995, the date
respondent filed the answer. See Huffman v. Commissioner, 978
F.2d 1139, 1143-1147 (9th Cir. 1992), affg. in part and revg. in
part on other grounds and remanding T.C. Memo. 1991-144. In this
case, respondent's position on each of these dates was the same.
More specifically, respondent's position was that petitioner
husband was "protected from loss", within the meaning of section
465(b)(4), with regard to his investment in the partnership, and,
therefore, petitioners were not entitled to loss and investment
interest expense deductions claimed on their 1985 and 1986
Federal income tax returns.
Whether respondent's position was not substantially
justified turns on a finding of reasonableness, based upon all
the facts and circumstances, as well as the legal precedents
5 Sec. 7430(c)(7)(B) provides that the Commissioner takes a
position in an administrative proceeding on the earlier of "the
date of the receipt by the taxpayer of the notice of the decision
of the * * * [IRS] Office of Appeals" or "the date of the notice
of deficiency." No notice of decision of the IRS Appeals Office
was ever issued or received by petitioners before the date of the
notices of deficiency. Therefore, respondent is considered to
have taken a position on the date the notices of deficiency were
issued.
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