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OPINION
Section 7430(a)(1) allows a taxpayer to recover reasonable
administrative costs incurred in certain administrative
proceedings before the Internal Revenue Service. The Court may
award such a recovery if the taxpayer: (1) Is the prevailing
party and (2) did not unreasonably protract the administrative
proceeding. Sec. 7430(a) and (b)(3). A taxpayer is not a
“prevailing party” if the Commissioner establishes that the
Commissioner’s position in the administrative proceeding was
substantially justified. Sec. 7430(c)(4)(B)(i). For purposes of
this case, respondent concedes that petitioner is entitled to an
award of reasonable administrative costs if the Commissioner’s
position in the administrative proceeding was not substantially
justified. The Commissioner is considered to have taken a
position in that proceeding as of the date of the notice of
deficiency. Sec. 7430(c)(7)(B).
The Commissioner’s position is substantially justified if it
had a reasonable basis in both law and fact, or, in other words,
was “justified to a degree that could satisfy a reasonable
person”. Pierce v. Underwood, 487 U.S. 552, 565 (1988); Han v.
Commissioner, T.C. Memo. 1993-386. We look to whether the
Commissioner’s position was reasonable given the legal precedents
and available facts and circumstances at the time the
Commissioner took his position. Maggie Mgmt. Co. v.
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