Helen E. Foy - Page 13

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          administrative and litigating positions were substantially                  
          justified and that the costs petitioner claims are unreasonable.            
          A.  Whether Respondent’s Administrative and Litigation Positions            
          Were Substantially Justified                                                
               For purposes of section 7430, an administrative proceeding             
          is any procedure or action before the Internal Revenue Service              
          (the Service), sec. 7430(c)(5), and the “position of the United             
          States” in an administrative proceeding refers to the position              
          taken by the Service as of the earlier of (i) the date of the               
          receipt by the taxpayer of the notice of decision of the Internal           
          Revenue Service Office of Appeals or (ii) the date of the notice            
          of deficiency, sec. 7430(c)(7)(B); see also sec. 301.7430-3(a),             
          (c), Proced. & Admin. Regs.  In this case, the relevant position            
          is that taken by the Appeals Office in the notice of                        
          determination dated September 10, 2002.                                     
               For purposes of section 7430, a court proceeding means any             
          civil action brought in a court of the United States, including             
          this Court, sec. 7430(c)(6), and the “position of the United                
          States” in a court proceeding means the position taken by the               
          United States in a judicial proceeding to which section 7430(a)             
          applies, sec. 7430(c)(7)(A).  In this case, respondent’s                    
          litigating position is that taken in his answer to petitioner’s             
          petition.  See Huffman v. Commissioner, 978 F.2d 1139, 1148 (9th            
          Cir. 1992), affg. in part, revg. in part and remanding T.C. Memo.           







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