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this Court, holding that the Commissioner’s determination to
impose the additions to tax was arbitrary, capricious, or without
sound basis in fact or law and remanded for further proceedings.
On remand, the taxpayer filed a motion for litigation costs.
In Mauerman II, the taxpayer contended that the
determination of the Court of Appeals that the Commissioner’s
failure to waive the addition to tax was an abuse of his
discretion necessarily led to a conclusion that the
Commissioner’s position was unreasonable and urged us to grant
the taxpayer’s motion for reasonable litigation costs. Although
we agreed with the taxpayer’s conclusion that the Commissioner’s
litigating position in Mauerman I was unreasonable under the
circumstances involved there, we recognized the possibility that
a different conclusion might be reached in other cases. We
explained our position as follows:
In Mauerman I, we stated that, in order to prevail
on the addition to tax issue, “petitioner must show
* * * that respondent’s refusal to waive is an abuse of
discretion.” In reversing our decision, the Court of
Appeals agreed with petitioner * * * that the
Commissioner should have waived the addition to tax.
The question before us, then, is whether respondent was
substantially justified in defending, in the instant
litigation, an administrative determination that was
held by the Court of Appeals to be an abuse of
discretion; i.e., arbitrary, capricious, or without
sound basis in fact. While there may be other
situations where such a holding would not necessarily
determine that respondent was not substantially
justified, our review of the record in the instant case
persuades us that petitioner has carried his burden in
that respect.
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Last modified: May 25, 2011