Robert Schwartz and Diane Schwartz - Page 3

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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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