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to be substantially justified under section 7430(c)(4)(B).
Accordingly, respondent contends, petitioners cannot qualify as a
prevailing party under section 7430(c)(4) and cannot therefore
recover administrative costs.
Respondent’s contention presupposes, of course, that before
a taxpayer can qualify as a “prevailing party” under section
7430(c)(4), the Government must take a position as defined in
section 7430(c)(7), i.e., issue a notice of deficiency or an
Appeals Office decision. This is the first time we are asked to
determine this issue since section 7430(c)(4) was amended by TBOR
2 in 1996, and we turn to it now.
A. Pre TBOR 2 Section 7430(c)(4)
Prior to the TBOR 2 amendment to section 7430(c)(4), the
taxpayer had to substantially prevail and, in addition, had the
burden of establishing that the “position of the United States”
in the proceedings was not substantially justified.7 If the
7 Prior to the TBOR 2 amendment, sec. 7430(c)(4) read, in
relevant part, as follows:
SEC. 7430(c)(4). Prevailing Party.--
(A) In General.–-The term “prevailing party”
means any party in any proceeding to which
subsection (a) applies (other than the United
States or any creditor of the taxpayer involved)--
(i) which establishes that the position of the
United States in the proceeding was not substantially
justified,
(continued...)
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