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advised that litigation costs would be requested if the case
could not be resolved quickly. At a May 15, 1998, trial
preparation conference, the parties discussed a settlement under
which respondent would allow the requested overpayment, and
petitioners would agree not to assert a claim for attorney’s
fees. Petitioners decided not to accept the settlement and to
proceed to trial.
The Commissioner’s position is substantially justified if
that position could satisfy a reasonable person and if it has a
reasonable basis in both fact and law. See Pierce v. Underwood,
487 U.S. 552, 565 (1988). We examine the facts known to the
Commissioner at the time the position was taken. See Maggie
Management Co. v. Commissioner, 108 T.C. 430, 443 (1997).
Respondent must prove that his position was substantially
justified. See sec. 7430(c)(4)(B). The fact that the
Commissioner eventually loses or concedes a case does not
establish an unreasonable position. See Wasie v. Commissioner,
86 T.C. 962, 968-969 (1986). However, the Commissioner’s
concession does remain a factor to be considered. See Dugan v.
Commissioner, T.C. Memo. 1997-458.
Contrary to petitioners’ position, respondent contends that
he was substantially justified in his position from the issuance
of the statutory notice of deficiency on May 23, 1997, until the
calendar call on May 18, 1998. Petitioners did not provide
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