- 15 -
evidence as a reasonable mind might accept as adequate to support
a conclusion'." Pierce v. Underwood, supra at 564-565 (quoting
Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229 (1938)).
Respondent argues that respondent's position was
substantially justified as to each issue raised in the notices of
deficiency. We have previously adopted an issue-by-issue
approach to the awarding of costs under section 7430. Swanson v.
Commissioner, supra at 102; see Powers v. Commissioner, 51 F.3d
34, 35 (5th Cir. 1995).
A. Adjustment to Petitioners' 1993 Tax Return
The statutory notice of deficiency issued to petitioners
included an adjustment in the amount of $47,086 based on payments
made by PCCL either to petitioners or for their benefit.
Respondent determined that petitioners received constructive
dividends from three separate transactions.
Based on the information set forth below, which was known to
respondent at the time the statutory notice of deficiency was
issued, and which information remained unchanged at the time of
the answer to their petition, we are satisfied that respondent
had a basis in fact for the position that petitioners had
unreported income in the amount of $47,086.
(1). Constructive Dividend: Unreported Income
Received for Sales of PCCL Equipment
Petitioner admitted to special agents during interviews with
CID that he made two sales of PCCL equipment, had the proceeds of
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