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We agree with respondent that his position as to the
underlying tax deficiencies and the fraud additions to tax for
1987 and 1988 was substantially justified.
In reversing our Memorandum Opinion, the Court of Appeals
for the Fifth Circuit noted that in its opinion there existed a
lack of persuasive evidence in favor of petitioner or respondent
and based its reversal on respondent’s burden of proof. Payne v.
Commissioner, 224 F.3d at 420-424. The Court of Appeals stated
as follows: "Despite our painstaking review of the record, we
are unable to determine which of these competing positions more
closely comports with reality." Id. at 424. The Court of
Appeals continued --
The expansive record in this case certainly
demonstrates that Payne has no acumen for keeping
orderly records of his financial dealings; and we
sympathize with the government and the Tax Court for
the difficulty they faced in reconstructing Payne’s
financial affairs and then attempting to determine
their tax consequences. In addition, we are aware
that, in some cases, poor record keeping has been
deemed indicative of fraud. * * *
* * * This evidentiary equipoise results in a
draw * * * [Id.]
We believe and so hold that the fact that we decided the
underlying issues in favor of respondent combined with the fact
that the Court of Appeals for the Fifth Circuit reversed on the
basis of a “draw” establishes that the position of respondent
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