Nadeem Chowdhury and Brenda S. Garth Chowdhury - Page 3

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          upon the following expenses: $60.00 for the filing fee and $3,860           
          for attorney's fees.  An objection to petitioner's motion by                
          respondent was filed.                                                       
               Neither party requested a hearing on petitioners' motion.              
          Rule 232(a).  Accordingly, we rule on petitioners' motion on the            
          basis of the parties' submissions and the record in this case.              
          The underlying issues raised in the petition were settled by a              
          stipulation of settlement.  At the time the petition was filed,             
          petitioners resided in San Antonio, Texas.                                  
               By notice of deficiency, respondent determined deficiencies            
          in petitioners' Federal income taxes of $7,182, $3,290, and                 
          $3,378 for the taxable years 1995, 1996, and 1997, respectively.            
               Under section 7430, a taxpayer may be awarded a judgment for           
          reasonable litigation costs if the taxpayer establishes certain             
          criteria and if respondent’s position was not substantially                 
          justified.  Respondent concedes that petitioner substantially               
          prevailed for purposes of section 7430(c)(4)(A)(i).  However,               
          respondent maintains that his position was substantially                    
          justified, that petitioners did not exhaust their administrative            
          remedies, that petitioners unreasonably protracted the Court                
          proceeding, and that the costs claimed are not reasonable.                  
          Because of our disposition of this issue, we need only address              
          whether respondent's position was substantially justified.                  
               In deciding the merits of a motion for litigation costs, the           

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