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under the facts of petitioners' cases, IC should be required to
use the accrual method of accounting.
Thus, in these cases, the fact that respondent eventually
conceded does not establish that his position was unreasonable.
See Bouterie v. Commissioner, 36 F.3d at 1367; Estate of Perry v.
Commissioner, 931 F.2d at 1046; Sokol v. Commissioner, 92 T.C. at
767.
Moreover, respondent has never conceded that IC should not
be required to use the accrual method of accounting. Rather, as
described by the attorney in the Assistant Chief Counsel's
office, respondent's concession was based on "a poor choice of
words" in the stipulation of facts that amounted to "the
concession of a key fact". After discovering the error,
respondent promptly conceded his position. It was reasonable for
respondent to take the position that IC should be required to use
the accrual method of accounting until the time as respondent
committed what he regarded as a litigation error. Shortly after
discovering the error respondent conceded the cases.
Therefore, we hold that respondent has established that his
position in the administrative and litigation proceedings was
substantially justified because he acted reasonably given the
legal precedent and the circumstances surrounding petitioners'
cases. Accordingly, petitioners are not entitled to recover
administrative or litigation costs.
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