Dartmouth Clubs, Inc. - Page 8




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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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