- 11 -
legal basis for his position. Moreover, it is clear
that there was no existing legal authority that would
have made respondent’s arguments under sections 446 and
471 unreasonable since, at least until the issuance of
Osteopathic Medical, the pivotal issue in this case,
whether oncology drugs administered by health care
providers constituted merchandise, was an issue of
first impression. Accordingly, unlike Mauerman, the
record in this case does not warrant a determination
that respondent’s position was not substantially
justified.
Respondent urges us, as we did in Stieha v. Commissioner, 89
T.C. 784, 790-791 (1987), to allow respondent a reasonable amount
of time following adverse litigation on an issue of first
impression to adjust his litigating position before we determine
that his litigating position warrants an award of costs under
section 7430. Respondent points out that the decision in
Osteopathic Med. Oncology & Hematology, P.C. v. Commissioner, 113
T.C. 376 (1999), became final on April 7, 2000, just 4 days
before the opinion in the instant case was rendered. Twenty-one
days after the decision in Osteopathic Med. Oncology &
Hematology, P.C. became final, the Commissioner issued an action
on decision acquiescing in that case as to result only. See
Action on Decision 2000-005 (Apr. 28, 2000).
Respondent’s litigating position at trial in Mid-Del I
flowed from his conclusion that the drugs purchased and used by
petitioners were merchandise and an income-producing factor in
their businesses. In support of this position, respondent argued
that the drugs were tangible products that were purchased by
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