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simplified production method may be elected for any trade or
business as a method for determining costs allocable to ending
inventories of produced and other eligible property on hand at
the end of the year. See sec. 1.263A-2(b)(1) and (2), Income Tax
Regs. The record in this case fails to show that petitioners
ever made any such election or that they made any argument to
respondent that they relied upon the above provision when
reporting the expenses on their return for 1995.
We find that respondent's position that the $2,008.06
represented an amount that had to be capitalized into the cost of
the Vallecito property was a reasonable application of the law
given the available facts and circumstances at the time that
respondent took his position.
Conclusion
We find that respondent's positions on the disputed issues
were reasonable positions sufficiently supported by the facts and
circumstances in petitioners' case and the existing legal
precedent. See Pierce v. Underwood, 487 U.S. 552 (1988).
Because we find respondent's positions to have been reasonable,
we cannot find petitioners to be "prevailing" parties, and their
motion will therefore be denied.
To reflect the foregoing,
An appropriate order will
be issued, and decision will be
entered under Rule 155.
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