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not unreasonably protract the judicial proceeding, and (4)
claimed reasonable litigation costs. Sec. 7430(a), (b)(1), (3),
and (c). These requirements are conjunctive, and failure to
satisfy any one will preclude an award of costs to petitioners.
See Minahan v. Commissioner, 88 T.C. 492, 497 (1987).
To be a “prevailing party” (1) the taxpayer must
substantially prevail with respect to either the amount in
controversy or the most significant issue or set of issues
presented, and (2) at the time the petition in the case is filed,
the taxpayer must meet the net worth requirements of 28 U.S.C.
sec. 2412(d)(2)(B). Sec. 7430(c)(4)(A). A taxpayer, however,
will not be treated as the prevailing party if the Commissioner
establishes that the Commissioner’s position was substantially
justified. Sec. 7430(c)(4)(B). For purposes of the court
proceedings, the Commissioner’s position is that which was set
forth in the answer. Sec. 7430(c)(7)(A); Huffman v.
Commissioner, 978 F.2d 1139, 1147-1148 (9th Cir. 1992), affg. in
part and revg. in part T.C. Memo. 1991-144; Maggie Mgmt. Co. v.
Commissioner, 108 T.C. 430, 442 (1997).
The substantially justified standard is “essentially a
continuation of the prior law’s reasonableness standard.”
Swanson v. Commissioner, 106 T.C. 76, 86 (1996). A position is
substantially justified if it is justified to a degree that could
satisfy a reasonable person and has a reasonable basis in both
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