John S. Gibson, f.k.a. John S. Mactavish - Page 7




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          and the prevailing party must not protract either the                       
          administrative or court proceedings.  See sec. 7430(b)(1), (3).             
          The parties agree that petitioner exhausted his administrative              
          remedies.4                                                                  
               A prevailing party is defined as a taxpayer who                        
          substantially prevails as to the amount in controversy or with              
          respect to the most significant issue or set of issues.  See sec.           
          7430(c)(4)(A)(i); sec. 301.7430-5(a)(2), Proced. & Admin. Regs.             
          Respondent concedes that petitioner substantially prevailed as to           
          the amount in controversy or with respect to the most significant           
          set of issues.  Petitioner will nevertheless fail to qualify as             
          the prevailing party if respondent can establish that                       
          respondent’s position in the administrative and court proceedings           
          was substantially justified.  See sec. 7430(c)(4)(B).                       
               B.  Substantial Justification                                          
               The Commissioner will be substantially justified where his             
          position has a reasonable basis in both law and fact.  See Pierce           
          v. Underwood, 487 U.S. 552 (1988); Rickel v. Commissioner, 900              
          F.2d 655, 665 (3d Cir. 1990), affg. in part and revg. in part on            
          other grounds 92 T.C. 510 (1989); Hanover Bldg. Materials, Inc.             
          v. Guiffrida, 748 F.2d 1011, 1015 (5th Cir. 1984).                          




               4    As a result of our conclusion herein, we need not                 
          decide whether petitioner protracted the proceeding.                        





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