Donald C. Richardson and Rita M. Allaire - Page 15

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          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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