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indicate that Mr. Sherbo had a higher adjusted gross income than
petitioner in both 1995 and 1996. Consequently, if Mr. Sherbo
and petitioner both shared the same principal place of abode
along with their children during the taxable years in issue, only
Mr. Sherbo would be eligible to claim earned income credit with
respect to both Liane and Sean in both 1995 and 1996. Whether
respondent's litigation position was substantially justified thus
turns on whether respondent had reasonable grounds to conclude
that petitioner and Mr. Sherbo may have shared the same household
in 1995 and 1996.
Both petitioner and Mr. Sherbo's tax returns for these years
provide the same mailing address. Furthermore, petitioner listed
Mr. Sherbo as a member of her household in her December 23, 1997,
reply to respondent's request for information. It was not until
her reply to respondent's March 2, 1998, letter proposing changes
to petitioner's 1995 and 1996 tax liability that petitioner
indicated Mr. Sherbo used her address only for mailing purposes
and did not actually live with her during the years in issue
except for 4 months in 1996. Petitioner, however, did not
substantiate this claim with any corroborating evidence.
Although petitioner enclosed with her reply copies of a Form
8332 as requested by respondent and wage withholding records,
this evidence does not establish that petitioner was entitled to
the earned income credit at issue. The Form 8332 provided by
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