Donald C. Richardson and Rita M. Allaire - Page 25

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          example, there appears to be no instance of respondent's failing            
          to consider a claim made by PCCL for entitlement to a deduction             
          that had been supported by sufficient proof.  In the context of             
          what respondent knew at the time the notices of deficiency were             
          issued and the petitions were answered, there was substantial               
          evidence to support respondent's position.                                  
               3.  Conclusion                                                         
               We conclude that respondent had a reasonable basis in fact             
          and law for all issues raised in the notices of deficiency based            
          on the investigation of these cases conducted by respondent                 
          before trial.  See Reinhardt v. Commissioner, T.C. Memo. 1995-82.           
          We also conclude that respondent's position that petitioners and            
          PCCL were liable for the penalties for fraud, or alternatively,             
          for negligence for 1993 had a reasonable basis in both fact and             
          law.  We hold that respondent has established that respondent's             
          position was substantially justified and that neither petitioners           
          nor PCCL are entitled to an award for administrative and                    
          litigation costs under section 7430.  Petitioners' and PCCL's               
          motions will therefore be denied.11                                         
               To reflect the foregoing,                                              
                                                  Appropriate orders and              
                                             decisions will be entered.               

               11   As a result of our conclusions herein, we need not                
          decide whether the amounts of petitioners' claimed administrative           
          and litigation costs are reasonable.                                        

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