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in controversy or with respect to the most significant issue or
set of issues presented, sec. 7430(c)(4)(A)(i), and that the
taxpayer is either an individual whose net worth does not exceed
$2 million, or an owner of any unincorporated business, or any
partnership, corporation, etc., the net worth of which does not
exceed $7 million, at the time the petition is filed, see sec.
7430(c)(4)(A)(ii); 28 U.S.C. sec. 2412(d)(2)(B) (1988).
Respondent concedes that petitioner substantially prevailed with
respect to either the amount in controversy or the most
significant issues and that petitioner meets the net worth
requirements.
A party, however, will not be treated as the prevailing
party if the United States establishes that the position of the
United States in the proceeding was substantially justified. See
sec. 7430(c)(4)(B)(i). Respondent contends that petitioner is
not the prevailing party because the position that respondent
took regarding the disallowed expense deductions was
substantially justified. We agree with respondent.
The United States' position is substantially justified if it
is "justified to a degree that could satisfy a reasonable person"
and has a "reasonable basis in both law and fact." Pierce v.
Underwood, 487 U.S. 552, 565 (1988) (interpreting similar
language in the Equal Access to Justice Act, 28 U.S.C. sec 2412
(1988)); see also Maggie Management Co. v. Commissioner, 108 T.C.
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