Joseph F. and Camille T. Uddo - Page 7

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                    worth requirements of 28 U.S.C. section 2412(d)(2)(B) at the time                                                                                      
                    the petition in the case was filed.  Sec. 7430(c)(4)(A).                                                                                               
                    However, a party shall not be treated as the prevailing party if                                                                                       
                    the United States establishes that the position of the United                                                                                          
                    States in the proceeding was substantially justified.  Sec.                                                                                            
                    7430(c)(4)(B).                                                                                                                                         
                              Respondent contends that the position of the United States                                                                                   
                    was substantially justified and that petitioners have not proved                                                                                       
                    that they exhausted their administrative remedies.  Respondent                                                                                         
                    concedes that petitioners have satisfied the other requirements                                                                                        
                    of section 7430.                                                                                                                                       
                              To decide whether respondent's position was substantially                                                                                    
                    justified, the Court must first identify the point in time at                                                                                          
                    which the United States is considered to have taken a position                                                                                         
                    and then decide whether the position taken from that date forward                                                                                      
                    was substantially justified.  In general, we bifurcate our                                                                                             
                    analysis and look separately at the dates that respondent took a                                                                                       
                    position in the administrative proceeding and in the proceeding                                                                                        
                    in this Court.  Sec. 7430(c)(7)(A) and (B); Huffman v.                                                                                                 
                    Commissioner, 978 F.2d 1139, 1144 (9th Cir. 1992), affg. in part,                                                                                      
                    revg. in part and remanding T.C. Memo. 1991-144.  In the instant                                                                                       
                    case, however, we may dispense with the bifurcated analysis                                                                                            
                    because respondent's position on each of these dates was the                                                                                           
                    same.  Swanson v. Commissioner, 106 T.C. 76, 87 (1996).                                                                                                
                    Respondent took a position in the administrative proceeding when                                                                                       




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