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As relevant herein, the position of the United States that
must be examined against the substantial justification standard
with respect to the recovery of litigation costs is the position
taken by the Commissioner in the answer to the petition. Sher v.
Commissioner, 861 F.2d 131, 134-135 (5th Cir. 1988); see sec.
7430(c)(7)(A). In the present case, respondent did not file an
answer after the petition was filed July 8, 2002,3 but we note
that respondent’s position was the same until November 5, 2002,
the date of respondent’s Fresno Appeals Office letter to
petitioner. More specifically, respondent’s position was that
petitioner was required to file a Federal income tax return for
the 1997 taxable year because third-party payor information
indicated petitioner received $17,685 from sales of stocks and
bonds during that year.
Considering all the facts and circumstances, respondent did
not know and could not have known that his position was invalid
after the petition was filed. Respondent did not know what the
original purchase prices were with respect to the stocks and
bonds sold in 1997. He knew only that the petitioner realized
$17,685 from the sale of such stocks and bonds. At no time did
petitioner provide respondent with any information from which to
verify his base in the stocks and bonds sold.
3 Rule 175(b) provides generally that no answer is required
where a petition is filed pursuant to sec. 7463.
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