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answer was substantially justified. Consequently, we conclude
that petitioner is the prevailing party.
B. Exhaustion of Administrative Remedies
Section 7430(b)(1) provides in part: “A judgment for
reasonable litigation costs shall not be awarded under subsection
(a) in any court proceeding unless the court determines that the
prevailing party has exhausted the administrative remedies
available to such party within the Internal Revenue Service.” In
general, in order to exhaust administrative remedies, the
taxpayer or the taxpayer’s qualified representative must
participate in an Appeals Office conference. Sec. 301.7430-
1(b)(1)(i), Proced. & Admin. Regs. “Participation” in an Appeals
Office conference is defined as “[disclosure] to the Appeals
office [of] all relevant information regarding the party’s tax
matter to the extent such information and its relevance were
known or should have been known to the party or qualified
representative at the time of such conference.” Sec. 301.7430-
1(b)(2), Proced. & Admin. Regs.
The documents in the record indicate that the parties
conducted petitioner’s conference through oral and written
correspondence and that the conference began in July 2001 and
ended on October 17, 2001. During this period, in the July 31
letter, petitioner argued that he had settled the taxable year
1983, and petitioner attached copies of the settlement
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