Phillip A. O'Bryon and Cyndie W. O'Bryon - Page 26

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          Sokol v. Commissioner, 92 T.C. 760, 765-766 n.10 (1989); Sher v.            
          Commissioner, 89 T.C. 79, 87 (1989); DeVenney v. Commissioner, 85           
          T.C. 927 (1985); see also Johnson v. Commissioner, T.C. Memo.               
          1991-447; Spirtis v. Commissioner, T.C. Memo. 1985-44.                      
               The fact that respondent's counsel ultimately decided to               
          concede the case may reflect a consideration of a variety of                
          factors--including litigation risks--which earlier were not                 
          considered or which were not weighed as heavily by respondent.              
          Furthermore, the record shows that the parties were actively                
          engaged in negotiations throughout the litigation process, and              
          that respondent did not unreasonably delay acting upon any                  
          information which he received from petitioners.                             
               Accordingly, we find respondent's position denying Schedule            
          E loss deductions for the tax years 1992 through 1994 reasonable            
          and substantially justified.                                                
          Deductions for Losses Arising From Diplomat Associates                      
               The parties disagreed as to whether petitioners were                   
          entitled to claim a deduction for section 1231 loss resulting               
          from an unsuccessful operation of Diplomat Associates, an                   
          accrual-method partnership that Phillip and his associates formed           
          in 1986 in order to engage in an apartment rental business.                 
          Diplomat Associates purchased an apartment building for                     
          approximately $1.4 million, the cost of which was financed in               
          large part by a mortgage made to the partnership.                           

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