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relating to the case. Pierce v. Underwood, 487 U.S. 552, 565
(1988); Swanson v. Commissioner, 106 T.C. 76, 86 (1996). A
position is substantially justified if the position is "justified
to a degree that could satisfy a reasonable person." Pierce v.
Underwood, supra at 565. The Court must "consider the basis for
respondent's legal position and the manner in which the position
was maintained." Wasie v. Commissioner, 86 T.C. 962, 969 (1986).
Deciding whether the Commissioner’s position and conduct were
reasonable necessarily requires considering the facts available
to the Commissioner at that time. Coastal Petroleum Refiners,
Inc. v. Commissioner, 94 T.C. 685, 689 (1990); DeVenney v.
Commissioner, 85 T.C. 927, 930 (1985). The fact that the
Commissioner eventually loses or concedes a case does not
establish an unreasonable position. Sokol v. Commissioner, 92
T.C. 760, 767 (1989).
Respondent's position in the notice of deficiency and in the
answer was that The Fourth Dreamer had unsubstantiated
expenditures which, because they were not proven to be ordinary
and necessary business expenses, inured to the benefit of the two
shareholders of record in 1995, one of whom was petitioner.
Petitioner claims that, to have been substantially justified in
his position, respondent must have been able to prove that
petitioner actually received benefits which were constructive
dividends from The Fourth Dreamer.
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