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relating to the case. Pierce v. Underwood, 487 U.S. 552 (1988);
Sher v. Commissioner, 89 T.C. 79, 84 (1987), affd. 861 F.2d 131
(5th Cir. 1988). A position is substantially justified if the
position is "justified to a degree that could satisfy a
reasonable person." Pierce v. Underwood, supra at 565; Powers v.
Commissioner, 100 T.C. 457, 470-471 (1993), affd. in part and
revd. in part 43 F.3d 172 (5th Cir. 1995). A position that
merely possesses enough merit to avoid sanctions for
frivolousness will not satisfy this standard; rather, it must
have a "reasonable basis both in law and fact". Pierce v.
Underwood, supra at 564-565.
The Court must "consider the basis for respondent's legal
position and the manner in which the position was maintained."
Wasie v. Commissioner, 86 T.C. 962, 969 (1986). The fact that
respondent eventually loses or concedes a case does not establish
an unreasonable position. Sokol v. Commissioner, 92 T.C. 760,
767 (1989); Baker v. Commissioner, 83 T.C. 822, 828 (1984),
vacated on other issues 787 F.2d 637 (D.C. Cir. 1986). The
reasonableness of respondent's position and conduct necessarily
requires considering what respondent knew at the time. Cf.
Rutana v. Commissioner, 88 T.C. 1329, 1334 (1987); DeVenney v.
Commissioner, 85 T.C. 927, 930 (1985). Petitioners have the
burden of establishing that respondent's position was
unreasonable. Rule 232(e). To show lack of substantial
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