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Petitioner has not shown that this is a situation where
respondent's position had no possible chance of success at the
time the position was taken. The Bowdens had alleged in their
petition to the Court that they were not liable for any
additional tax. Therefore, respondent's initial failure to state
that the corporation was entitled to a section 362 basis
adjustment was not unreasonable given the possibility that the
Bowdens might prevail in their case. In the end, the Bowdens
conceded gain recognition under section 357. Nevertheless,
respondent's initial failure to compute a section 362 basis
adjustment for the corporation was proper given the unknown
ultimate outcome of the Bowdens' case.
Respondent filed an answer to the amended petition, and an
amended answer to the amended petition. In those pleadings,
respondent agreed that the corporation was entitled to the
corresponding section 362 adjustment should the Bowdens recognize
gain from the section 351 transaction. We find the Government's
position reasonable given the facts and circumstances of this
case.
The Court has previously indicated that it is preferable for
the Government to clearly indicate that alternative positions are
being taken and to state that there is no intention to tax the
same income twice. See Dixson Intl. Serv. Corp. v. Commissioner,
supra at 715; Doggett v. Commissioner, 66 T.C. 101, 104 (1976).
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