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C. Substantial Justification
An administrative or litigating position of the United
States is substantially justified if it has a reasonable basis in
both law and fact. E.g., Maggie Mgmt. Co. v. Commissioner, supra
at 443. We determine the reasonableness of respondent’s
positions on the two issues in this case based upon the facts
available to respondent at the time he took the positions and the
controlling legal precedent at such time. Id. The fact that
respondent conceded both issues does not, by itself, establish
that his positions with respect thereto were unreasonable. Id.
However, it is a factor that may be considered. Id.
II. Application of the “Substantially Justified” Standard
A. The Discharge of Indebtedness Issue
The determination of whether a discharge of indebtedness has
occurred for tax purposes is extremely fact specific, often
turning on the subjective intent of the creditor as manifested by
an objectively identifiable event.7 In the instant case, the
7 See, e.g., Friedman v. Commissioner, T.C. Memo. 1998-196
(finding “no identifying event or forgiveness on the part of the
creditors” that would indicate a discharge of indebtedness during
the year in question), affd. 216 F.3d 537 (6th Cir. 2000); cf.
sec. 1.6050P-1(b)(1) and (2)(i)(G), Income Tax Regs. (for
information reporting purposes, debt is discharged upon the
occurrence of any of the “identifiable events” specified in the
regulation, including a discharge pursuant to a decision by the
creditor, or the application of a defined policy of the creditor,
to discontinue collection activity and discharge the debt). See
generally Cozzi v. Commissioner, 88 T.C. 435, 445-448 (1987)
(general discussion of “identifiable event” standard).
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