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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.
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). The reasonableness of respondent's position and
conduct necessarily requires considering what respondent knew at
the time. DeVenney v. Commissioner, 85 T.C. 927, 930 (1985).
In this case, the notice of deficiency was issued on
September 30, 1996, the petition was filed by petitioner pro se
on December 27, 1996, the amended petition was filed on March 3,
1997, and respondent's answer to the amended petition was filed
on April 11, 1997.
Petitioner's 1981 Federal income tax return was due on April
15, 1982. The return was not timely filed. In 1985, one of
respondent's revenue officers spent over 6 months in order to
collect certain taxes owed by entities controlled by petitioner
and to ascertain whether petitioner had filed his own individual
income tax returns. The revenue officer discovered petitioner
had not filed his 1981 individual income tax return. Thereafter,
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