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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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