- 24 -                                         
          disallowance of the Hoyt partnership items before taking his                
          litigating position in this case.  Respondent, who has the burden           
          of proving actual knowledge under section 6015(c)(3)(C), should             
          have meaningfully evaluated whether he could prove that                     
          petitioner had actual knowledge by taking into account the                  
          information petitioner supplied, the extensive audit and                    
          litigating history regarding the Hoyt organization and the Hoyt             
          partnerships, and the specific information regarding the manner             
          in which the Hoyt organization operated the Hoyt partnerships,              
          including the ones in which petitioner and Mr. Bulger had                   
          invested.  The record does not indicate that respondent                     
          considered any of the information that was available to him in              
          April 2003 before adopting his litigating position, other than              
          the fact that petitioner and Mr. Bulger had made a joint                    
          investment in SGE.  Respondent’s failure to evaluate the                    
          information in his possession and its effect on his ability to              
          prove that petitioner had actual knowledge of the items giving              
          rise to the deficiencies cannot be rationalized.  We conclude               
          that respondent’s litigating position regarding actual knowledge            
          was not reasonable or justified.  See Stieha v. Commissioner, 89            
          T.C. 784, 791 (1987) (Commissioner’s lack of diligence in                   
          evaluating impact of recent court opinions not substantially                
          justified).                                                                 
Page:  Previous   14   15   16   17   18   19   20   21   22   23   24   25   26   27   28   29   30   31   32   33   NextLast modified: May 25, 2011