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Prevailing Party
To be a "prevailing party", a taxpayer must2 (1) establish
that respondent's position was not substantially justified; (2)
substantially prevail with respect to either the amount in
controversy or the most significant issue or set of issues
presented, and (3) meet the net worth requirements of 28 U.S.C.
sec. 2412(d)(2)(B). See sec. 7430(c)(4)(A)(i), (ii), and (iii).
Respondent concedes that petitioners substantially prevailed
with respect to the amount in controversy and the most
significant issue involved in this case and met the net worth
requirements. The parties dispute, however, whether respondent's
position in the judicial proceeding was substantially justified.
Specifically, petitioners make three arguments as to why
respondent's position was not substantially justified: (1)
Respondent took inconsistent positions with respect to
petitioners and Frances Ryan, claiming that the payments made by
petitioners were not alimony, but the payments received by
2In 1996, legislation was enacted which shifted to the
Commissioner the burden of proving whether the position of the
United States was substantially justified. See sec.
7430(c)(4)(B), as amended by the Taxpayer Bill of Rights 2 (TBOR
2), Pub. L. 104-168, sec. 701, 110 Stat. 1452, 1463 (1996). The
changes made by this legislation apply only to proceedings
commenced after July 30, 1996. TBOR 2 secs. 701(d), 702(b), 110
Stat. 1464. Since petitioners filed their petition on Jan. 22,
1996, the proceedings at issue were commenced before the
effective date of TBOR 2, and the changes enacted by TBOR 2 are
not applicable. See Maggie Management Co. v. Commissioner, 108
T.C. 430, 441 (1997).
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Last modified: May 25, 2011