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Prevailing Party
To be a “prevailing party” (1) the taxpayer must
substantially prevail with respect to either the amount in
controversy or the most significant issue or set of issues
presented, and (2) at the time the petition in the case is filed,
the taxpayer must meet the net worth requirements of 28 U.S.C.
sec. 2412(d)(2)(B) (1994). Sec. 7430(c)(4)(A). A taxpayer,
however, will not be treated as the prevailing party if the
Commissioner establishes that his position was substantially
justified. See sec. 7430(c)(4)(B).
Respondent contends that petitioners are not a prevailing
party because his position was substantially justified.4
Petitioners argue that respondent's position was not
substantially justified because (1) respondent erroneously relied
on section 71(b) after the amendments made by DEFRA (post-DEFRA
section 71), to assess liability against petitioners, and (2)
respondent took inconsistent positions against Ms. Marten and
petitioners where respondent knew that only one petitioner could
be liable for the deficiency.
4 Respondent, alternatively, argues that petitioners have
not proven that (1) they meet the net worth requirement of sec.
7430(c)(4)(A)(iii), and (2) all litigation costs and fees claimed
were reasonable. Because we find that respondent's position was
substantially justified, we need not reach respondent's
alternative arguments.
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Last modified: May 25, 2011