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We disagree. As we stated above, petitioner finally
submitted all of the requested documents to respondent's Appeals
officer on March 17, 1998. On or before April 10, 1998,
respondent conceded all of the issues in the notice of
deficiency, and the signed stipulation was filed with the Court
on April 13, 1998. In our view, respondent timely reviewed the
documents submitted by petitioner. Due to the delay by
petitioner in providing adequate documentation, we are persuaded
that respondent's Appeals officer was unable to review the
documents prior to the submission of the trial memorandum.
Thus, we are satisfied that respondent exercised due
diligence in answering the petition, did not ignore documents in
respondent's possession, and reviewed the documents in a timely
manner. We note that within 8 months after respondent's answer,
the parties entered into a stipulation of settlement. The case
would have been resolved earlier if petitioner had provided
respondent with the necessary documents.
Because respondent had a reasonable basis in fact and law
for the positions taken in the answer and the trial memorandum,
we hold that respondent's position was substantially justified,
and therefore petitioner was not the prevailing party within the
meaning of section 7430(c)(4). Thus, we need not address the
issue of whether petitioner's claim for litigation costs was
reasonable.
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