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(1) Beginning on March 21, 2000, when the IRS released its
2000 Priority Guidance Plan, listing “loan origination costs”
among the expenditures to be addressed in “[g]uidance on
deduction and capitalization”, respondent was “pursuing” the
petitioners for deficiencies “under a litigating position
[capitalization of such costs] that * * * [he] knew * * * would
soon be reversed.” Petitioners reason that respondent’s
litigating position, even though ultimately successful in Lychuk
v. Commissioner, 116 T.C. 374 (2001), was not substantially
justified because respondent’s placement of the issue of “loan
origination costs” on the tax accounting issues list for priority
guidance “shows not only the high priority accorded to the issue
by the IRS at least as of March 2000, but also the IRS’
affirmative intent to actually publish guidance * * * on this
controversial issue in 2000.” Petitioners also point to the
internal IRS and joint IRS –- Treasury Department meetings in
2001 through 2002, which ultimately led to the January 24, 2002,
issuance of the ANPRM. Petitioners consider those meetings
evidence of respondent’s then present intent to concede issues
that petitioners were being forced to litigate in the
consolidated cases during that timeframe.
(2) Under section 7430(c)(4)(B)(iii), we must take into
account the fact that the Commissioner’s position was overruled
in PNC Bancorp, Inc. v. Commissioner, 212 F.3d 822 (3d Cir.
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