- 17 -
1996-452, affd. 182 F.3d 275 (4th Cir. 1999); Gaw v.
Commissioner, T.C. Memo. 1995-531.
Petitioners contend that respondent’s acceptance of
petitioners’ amended 1994 return based on section 108 establishes
that petitioners should be excused from the late payment addition
for 1993. We disagree. Respondent’s acceptance of petitioners’
amended 1994 return, which reduced income for forgiveness of
indebtedness based on insolvency under section 108, may show that
petitioners were insolvent when a debt of theirs was discharged
in 1994, not that they could not pay tax on their 1993 income.
5. Conclusion
We conclude that respondent had a reasonable basis in both
fact and law on January 13, 2000, for concluding that petitioners
were liable for the late payment addition for 1993. Thus,
respondent's position in the administrative proceeding was
substantially justified, and petitioners are not entitled to an
award of administrative costs under section 7430.
To reflect the foregoing,
Decision will be
entered for respondent.
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