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F.2d 131 (5th Cir. 1988). A position is substantially justified
if the position is “justified to a degree that could satisfy a
reasonable person.” Pierce v. Underwood, supra at 565; Powers v.
Commissioner, 100 T.C. 457, 473 (1993), affd. in part and revd.
in part 43 F.3d 172 (5th Cir. 1995). A position that merely
possesses enough merit to avoid sanctions for frivolousness will
not satisfy this standard; rather, it must have a “reasonable
basis both in law and fact”. Pierce v. Underwood, supra at 565.
The Court must “consider the basis for respondent’s legal
position and the manner in which the position was maintained.”
Wasie v. Commissioner, 86 T.C. 962, 969 (1986). The fact that
the Commissioner eventually loses or concedes the case does not
establish an unreasonable position. Sokol v. Commissioner, 92
T.C. 760, 767 (1989); Baker v. Commissioner, 83 T.C. 822, 828
(1984), vacated on other issues 787 F.2d 637 (D.C. Cir. 1986).
However, it remains a factor that may be considered. Estate of
Perry v. Commissioner, 931 F.2d 1044, 1046 (5th Cir. 1991);
Powers v. Commissioner, supra at 471. The reasonableness of the
Commissioner’s position and conduct necessarily requires
considering what the Commissioner knew at the time. Compare
Rutana v. Commissioner, 88 T.C. 1329, 1334 (1987), with DeVenney
v. Commissioner, 85 T.C. 927, 930 (1985).
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