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3. Conclusion
We hold that respondent’s litigating position was not
reasonable under the circumstances and that, therefore, it was
not substantially justified. Because respondent’s position was
not substantially justified, we conclude petitioner was the
prevailing party as defined by section 7430(c)(4)(A).
B. Whether Costs Claimed by Petitioner Are Reasonable
1. Amount of Costs Claimed
Section 7430 permits a taxpayer to recover reasonable
litigation costs. Litigation costs are those costs incurred in
connection with a court proceeding. Sec. 7430(a)(2), (c)(1).
Reasonable litigation costs include, among other things,
reasonable court costs and reasonable fees paid or incurred for
the services of attorneys. Sec. 7430(c)(1).
The amount of attorney’s fees we may award is limited by
statute and adjusted for cost of living. Sec. 7430(c)(1)(B)(iii)
(and flush language). For purposes of this motion, the statutory
rate for attorney’s fees is $150 per hour. See Rev. Proc. 2003-
85, sec. 3.33, 2003-2 C.B. 1184, 1190; Rev. Proc. 2002-70, sec.
3.32, 2002-2 C.B. 845, 850. A taxpayer may recover attorney’s
fees in excess of the statutory limit in the presence of one or
more of the following special factors: (1) Limited availability
of qualified attorneys for the proceeding, (2) difficulty of the
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