Robert M. and Paulette G. Maddox - Page 1

                                        T.C. Memo. 1998-449                                             

                                     UNITED STATES TAX COURT                                            

                      ROBERT M. AND PAULETTE G. MADDOX, Petitioners v.                                  
                         COMMISSIONER OF INTERNAL REVENUE, Respondent                                   

                  Docket No. 20959-96.             Filed December 23, 1998.                             

                        Respondent disallowed substantially all of petitioners’                         
                  claimed deductions.  The parties settled, with respondent                             
                  conceding about 97 percent of the disallowed deductions for                           
                  1 year and about 91 percent for the other year, and                                   
                  conceding that there were no deficiencies for either year.                            
                  Respondent’s position when filing the answer in the instant                           
                  case was based on respondent’s not yet having received                                
                  substantiation for the disallowed deductions.                                         
                        Held:  On the facts, respondent was primarily                                   
                  responsible for the substantiation not having been provided                           
                  by the time respondent filed the answer, and so respondent’s                          
                  position was not “substantially justified.”  Sec.                                     
                  7430(c)(4)(B)(i), I.R.C. 1986.  Stipulated amount of                                  
                  litigation costs awarded.                                                             

                  Daniel W. Schreimann, for petitioners.                                                
                  James E. Archie, for respondent.                                                      

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