- 17 -
Section 7430(c)(4)(B) provides that a taxpayer shall not be
treated as the prevailing party in any proceeding if the United
States establishes that its position in the proceeding was
substantially justified. See sec. 7430(c)(4)(B)(i). The
position of the United States in an administrative proceeding is
established as of the earlier of (1) the date the taxpayer
receives notice of a decision of the IRS Office of Appeals, or
(2) the date of the notice of deficiency. Sec. 7430(c)(7)(B).
The position of the United States in a deficiency proceeding in
this Court is that set forth in the Commissioner’s answer. E.g.,
Maggie Mgmt. Co. v. Commissioner, 108 T.C. 430, 442 (1997); see
sec. 7430(c)(7)(A).
B. Substantial Justification
For purposes of section 7430, a position of the United
States is substantially justified if it has a reasonable basis in
both law and fact. E.g., Maggie Mgmt. Co. v. Commissioner, supra
at 443. The determination of the reasonableness of that position
is based upon the available facts that formed the basis for the
position, as well as any controlling legal precedent. Id. The
inquiry is not a static one; that is, a position of the United
States that was reasonable when established may become
unreasonable in light of changed circumstances. See, e.g., Wasie
v. Commissioner, 86 T.C. 962, 969 (1986); see also sec. 301.7430-
5(c)(2), Proced. & Admin. Regs. (any award of administrative
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011