John Bowden, Inc. - Page 11

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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               
               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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