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and whether petitioner has demonstrated that the attorney's fees
and costs sought are reasonable litigation costs.
To be a "prevailing party", a taxpayer must substantially
prevail with respect to either the amount in controversy or the
most significant issue or set of issues presented and must meet
the net worth requirements of 28 U.S.C. sec. 2412(d)(2)(B)(1994).
See sec. 7430(c)(4). Even if a taxpayer meets these
requirements, she still is not a "prevailing party" if respondent
establishes that the United States' position in the proceeding
was substantially justified. See sec. 7430(c)(4)(B)(i).
Although respondent concedes that petitioner has
substantially prevailed in this case and that petitioner meets
the net worth requirements, respondent contends that petitioner
is not a prevailing party because respondent was substantially
justified in issuing the notices of deficiency.
A position is substantially justified if it 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)
(defining "substantially justified" in the context of the Equal
Access to Justice Act (EAJA), 28 U.S.C. sec. 2412(d)(1994));
Swanson v. Commissioner, 106 T.C. 76, 86 (1996). A reasonable
basis exists if legal precedent substantially supports
respondent's position given the facts available to respondent.
See Coastal Petroleum Refiners, Inc. v. Commissioner, 94 T.C.
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