Phillip A. O'Bryon and Cyndie W. O'Bryon - Page 6

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          of these requirements.  Thus, we must decide whether petitioners            
          are the prevailing party.                                                   
               To qualify as a "prevailing party", a taxpayer must                    
          establish the following:                                                    
               (1) The taxpayer substantially prevailed with respect to the           
          amount in controversy or with respect to the most significant               
          issue or set of issues presented.  See sec. 7430(c)(4)(A)(i).               
               (2) 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)            
               A party, however, will not be treated as the prevailing                
          party if the United States establishes that its position in the             
          proceeding was substantially justified.  See sec.                           
               In this case, while respondent determined a total of                   
          $550,567.15 in deficiencies, additions to tax, and penalties for            
          the years in issue, the March 20, 2000, settlement called for a             
          total of $170,399.71 in deficiencies, additions to tax, and                 
          penalties.  Respondent agrees that petitioners substantially                
          prevailed as to the amount in controversy and that they meet the            
          net worth requirement.  Respondent contends, however, that his              

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