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petition. See Rule 20(a). Generally, respondent initially takes
a position in the litigation on the date he files the answer in
response to the petition. See Huffman v. Commissioner, 978 F.2d
1139, 1148 (9th Cir. 1992), affg. in part, revg. in part on other
grounds, and remanding T.C. Memo. 1991-144; Han v. Commissioner,
T.C. Memo. 1993-386.
The Commissioner’s position is substantially justified if
that position 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); Sher v. Commissioner, 89 T.C. 79
(1987), affd. 861 F.2d 131 (5th Cir. 1988). The determination of
reasonableness is based on all of the facts and circumstances
surrounding the proceeding and the legal precedents relating to
the case. See Coastal Petroleum Refiners, Inc. v. Commissioner,
94 T.C. 685, 694-695 (1990). A position has a reasonable basis
in fact if there is such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion. See Pierce v.
Underwood, supra at 565. A position is substantially justified
in law if legal precedent substantially supports the
Commissioner’s position given the facts available to the
Commissioner. See Coastal Petroleum Refiners, Inc. v.
Commissioner, supra at 688. Determining the reasonableness of
the Commissioner’s position and conduct requires considering what
the Commissioner knew at the time. See Rutana v. Commissioner,
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