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before issuing a notice of deficiency.
Respondent claims that it was petitioner's burden to prove
that it was entitled to the deduction. However, petitioner
provided respondent with copies of the agreements at issue.
Respondent's determination was simply based on respondent's
interpretation of those agreements. At the time, respondent's
theory for disallowing the deduction was not completely clear,
and hence petitioner could do nothing further to substantiate the
claimed deduction.
In light of the foregoing, respondent has failed to
establish that respondent's position in the administrative and
court proceedings was substantially justified.
To reflect our disposition of the disputed issues and the
parties' concessions,
An appropriate order and
decision will be entered.
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Last modified: May 25, 2011