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alimony deduction of $27,600. On their 1994 return, petitioners
also claimed dependency exemptions for petitioner's minor
children and reported on the return that the children lived with
petitioners during the entire year 1994. Respondent's tax
auditor had at hand petitioners' 1993 and 1994 returns, and it
appeared that there was a reduction in support payments made to
Kim T. Bettencourt in 1994.
On July 12, 1996, respondent's Appeals officer requested
that petitioners submit additional information. On August 8,
1996, petitioners' counsel, Mr. Read, for the first time provided
to respondent's Appeals officer the court orders dated March 8,
1989 and December 22, 1989. Mr. Read also represented to
respondent's Appeals officer that, to his knowledge, the court
issued no other orders through 1993. Based upon the information
provided by Mr. Read subsequent to the issuance of the notice of
deficiency in docket No. 7950-96, respondent's Appeals officer
determined that petitioner and Kim T. Bettencourt had not
petitioned the Court to allocate the family support payments
between child support payments and spousal support and agreed
with petitioners that their claimed alimony deductions were
allowable.
On the basis of the facts contained in the record, we find
and hold that respondent was diligent in examining petitioners'
1993 and 1994 returns, and that at all relevant times
respondent's position in the administrative and litigation
proceedings was substantially justified.
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