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b. Professional Fees
Respondent does not appear to consider timeliness to be an
issue because the deductibility of petitioners’ professional fees
for the audit years was conceded (first in the trial memorandum
filed May 31, 2002, and, again, in the Stipulation of Settled
Issues filed June 10, 2002), in deference to the anticipated (but
not yet formally adopted) 12-month rule.
III. Analysis
A. Introduction
Petitioners’ argument that respondent’s proposed
capitalization of the loan origination/acquisition costs and
professional fees at issue was not substantially justified within
the meaning of section 7430(c)(4)(B) appears to proceed down
three separate but, ultimately, converging roads: Respondent has
been improperly litigating against (1) a position that he knew,
as early as March 21, 2000, would be adopted by the IRS; (2)
controlling, adverse caselaw in certain U.S. Courts of Appeals
(PNC Bancorp, Inc. v. Commissioner, 212 F.3d 822 (3d Cir. 2000),
and Wells Fargo & Co. and Subs. v. Commissioner, 224 F.3d 874
(8th Cir. 2000)); and (3) his own published guidance in the form
of Rev. Rul. 99-23, 1999-1 C.B. 998, the ANPRM issued January 24,
2002, Announcement 2002-9, issued February 15, 2002, and CCN
2002-21 issued March 15, 2002. Petitioners’ first two approaches
relate to the deductibility of the loan origination/acquisition
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