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In the case before us, Mr. Kean made payments to Ms. Kean
pursuant to a series of orders from a New Jersey court, and this
Court applied New Jersey law in its determination as to whether
the disputed payments constituted alimony pursuant to section 71.
Ultimately, this Court distinguished the facts of Gonzales from
the facts of the instant case, and determined that the disputed
payments in the instant case were alimony. Nonetheless, based on
the fact that Gonzales and the instant case both involve
unallocated support payments and interpretation of New Jersey
law, respondent’s reliance on Gonzales to frame his answer in the
instant case was substantially justified.
Based on the facts available to respondent, as well as the
legal precedent regarding the deductibility of unallocated
support payments, specifically this Court’s holding in Gonzales
v. Commissioner, supra, respondent’s position in his answer had a
reasonable basis in both law and fact, and therefore was
substantially justified.
Because respondent’s position in the judicial proceeding was
substantially justified, Mr. Kean is not deemed to be a
prevailing party as defined in section 7430(c)(4). Consequently,
Mr. Kean is not entitled to recover any of his claimed costs
under section 7430. As a result of this holding, we need not
address the questions of whether Mr. Kean meets the net worth
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Last modified: May 25, 2011