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See sec. 7430(c)(7)(A). Based on the facts available to
respondent at that time, as well as long-standing legal precedent
regarding the availability of tax deductions, respondent’s
position had a reasonable basis in both law and fact and
therefore was substantially justified. See Maggie Mgmt. Co. v.
Commissioner, 108 T.C. at 443. When respondent filed his answer,
he had received none of the documentation requested of
petitioners to substantiate the section 151(c) deductions. Since
deductions are a matter of “legislative grace”, New Colonial Ice
Co. v. Helvering, 292 U.S. 435, 440 (1934), a taxpayer claiming a
deduction “must be able to point to an applicable statute and
show that he comes within its terms.” Id. Furthermore, we have
observed on numerous occasions in the context of section 7430
that whenever the resolution of an adjustment requires a factual
determination, it is reasonable for the Commissioner to stand by
his adjustment until he has received from the taxpayer, and has
had a reasonable period of time to verify, documentation
sufficient to substantiate the item in question. See, e.g.,
Huynh v. Commissioner, T.C. Memo. 2002-110 (involving section
151(c) deductions).
We note further that when respondent’s Appeals officer
finally received, by letter dated July 18, 2001, the
documentation requested of petitioners, he agreed to a basis of
settlement within a reasonable period (approximately 90 days)
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