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justified. If respondent’s position is found to be substantially
justified, then the estates’ claim for litigation costs will
fail.6
Discussion
Section 7430(c)(4)(A) requires that, in order to qualify for
recovering administrative or litigation costs, the estates must
be the “prevailing party” in the proceeding. Generally, the
“prevailing party” is one who has substantially prevailed with
respect to the amount in controversy or with respect to the most
significant issue or set of issues presented. Sec.
7430(c)(4)(A)(i)(I) and (II). Based on that general rule or
standard, the estates were the prevailing parties in these
consolidated proceedings.
A party will not be considered a prevailing party, however,
if the “United States establishes that the position of the United
States in the proceeding was substantially justified.” Sec.
7430(c)(4)(B)(i). Respondent’s position in a proceeding is
“substantially justified” if it is “justified to a degree that
could satisfy a reasonable person” and if it has a reasonable
basis both in fact and law. Pierce v. Underwood, 487 U.S. 552,
564-565 (1988). The fact that respondent eventually loses or
6 If respondent’s position is found not to be substantially
justified, respondent contends, in the alternative, that the
amount of the estates’ claim for attorney’s fees is unreasonable
because it exceeds the statutory limit.
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