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of deficiency. See sec. 7430(c)(7)(B). The position of the
United States that must be examined against the substantial
justification standard with respect to the recovery of litigation
costs is the position taken by the Commissioner in the answer to
the petition. See Bertolino v. Commissioner, 930 F.2d 759, 761
(9th Cir. 1991); Sher v. Commissioner, supra at 134-135.
Ordinarily, we consider the reasonableness of each of these
positions separately. See Huffman v. Commissioner, 978 F.2d
1139, 1144-1147 (9th Cir. 1992), affg. in part, revg. in part and
remanding on other issues T.C. Memo. 1991-144. In the present
cases, however, we need not consider two separate positions
because there is no indication that respondent's position changed
or that respondent became aware of any additional facts that
rendered his position any more or less justified between the
issuance of the notices of deficiency and the filing of the
answers to the petitions.
We now turn to petitioners' contention that respondent's
position was not substantially justified. In order to decide
whether respondent's position was substantially justified we must
review the substantive merits of these cases.
Respondent determined that IC's cash/hybrid method of
accounting did not clearly reflect its income because merchandise
was an income-producing factor in IC's business and, therefore,
that the use of inventories was necessary to clearly determine
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