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7430(c)(4)(A)(i). And in the case of an individual taxpayer, the
term also means any party which had a net worth that did not
exceed $2,000,000 at the time the civil tax case proceeding was
commenced. Sec. 7430(c)(4)(A)(ii) (referring to 28 U.S.C. sec.
2412(d)(1)(B) and (2)(B)). However, a party shall not be treated
as the prevailing party if the Commissioner establishes that his
position was substantially justified. Sec. 7430(c)(4)(B).
Respondent contends that petitioner is not the prevailing
party within the meaning of section 7430(c)(4) because, while
respondent conceded the case, his position was substantially
justified.2 The Commissioner’s position is substantially
justified if, based on all of the facts and circumstances and the
legal precedents relating to the case, the Commissioner acted
reasonably. Pierce v. Underwood, 487 U.S. 552 (1988); Sher v.
Commissioner, 89 T.C. 79, 84 (1987), affd. 861 F.2d 131 (5th Cir.
1988). In other words, to be substantially justified, the
Commissioner’s position must have a reasonable basis in both law
and fact. Pierce v. Underwood, supra; Rickel v. Commissioner,
900 F.2d 655, 665 (3d Cir. 1990), affg. in part and revg. in part
on other grounds 92 T.C. 510 (1989). A position is substantially
justified if the position is “justified to a degree that could
2 As discussed above, respondent also contends that
petitioner unreasonably protracted the proceedings. As a result
of our conclusion herein, we need not address respondent’s
additional contention.
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