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penalty pursuant to the Internal Revenue Code; (2) has exhausted
his administrative remedies within the IRS; and (3) did not
unreasonably delay or protract the court proceedings. Respondent
concedes that petitioner exhausted his administrative remedies
but maintains that petitioner is not a prevailing party and that
he unreasonably delayed or protracted these proceedings.
To be a prevailing party, a taxpayer must satisfy the
applicable net worth requirements set forth in section
7430(c)(4)(A)(ii) and must substantially prevail with respect to
either the amount in controversy or the most significant issue or
set of issues presented. Sec. 7430(c)(4)(A). Respondent
concedes that petitioner satisfies the applicable net worth
requirements and that petitioner has substantially prevailed but
argues that respondent’s litigating position was substantially
justified.
Section 7430(c)(4)(B)(i) provides that a party shall not be
treated as a prevailing party if the Commissioner establishes
that his position was substantially justified. Whether the
Commissioner’s position was substantially justified is to be
resolved by applying a reasonableness standard. Pierce v.
Underwood, 487 U.S. 552, 564 (1988); Sher v. Commissioner, 89
T.C. 79, 84 (1987), affd. 861 F.2d 131 (5th Cir. 1988). The
litigating position of the Commissioner is substantially
justified if the position had a reasonable basis in both fact and
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Last modified: May 25, 2011