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deficiency was issued. See supra note 5. Accordingly, Harrison
v. Commissioner, supra, offers no solace to respondent.
We recognize, of course, that it is reasonable for the
Commissioner to refuse to concede an audit adjustment until after
he receives from the taxpayer, and has had an opportunity to
verify, adequate substantiation for such adjustment. E.g.,
O’Bryon v. Commissioner, T.C. Memo. 2000-379. However, we have
not so held in the context of a case in which expiration of the
period of limitations is not imminent and the Commissioner, while
in possession of all relevant facts and documents, neglects to
review such facts and documents and instead issues a notice of
deficiency to the taxpayer.
In view of the foregoing, we hold that the position taken by
respondent in the notice of deficiency was unreasonable.
We turn now to the position taken by respondent in the
answer to the petition. The latter position reflected
respondent’s concession, as evidenced by the no-change letter and
followup refund, of the deficiency, and such position was
substantially justified.
C. Unreasonable Protraction of the Proceedings
Pursuant to section 7430(b)(3), “No award for reasonable
litigation and administrative costs may be made * * * with
respect to any portion of the administrative or court proceeding
during which the prevailing party has unreasonably protracted
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