Ronald A. Horton - Page 8

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         and relevant legal arguments supporting the taxpayer’s position              
         to the appropriate Internal Revenue Service personnel.  Sec.                 
         301.7430-5(c), Proced. & Admin. Regs.  The fact that the                     
         Commissioner eventually conceded a case does not alone establish             
         that his position was unreasonable.  Estate of Perry v.                      
         Commissioner, 931 F.2d 1044, 1046 (5th Cir. 1991); Sokol v.                  
         Commissioner, 92 T.C. 760, 767 (1989).                                       
              Here, petitioner failed to specify whether he seeks                     
         litigation or administrative costs.  The position of the United              
         States with respect to recovery of litigation costs is the                   
         position taken by the Commissioner in the answer to the petition.            
         Sher v. Commissioner, 861 F.2d 131, 134-135 (5th Cir. 1988),                 
         affg. 89 T.C. 79 (1987).  For purposes of recovery of                        
         administrative costs, the Commissioner’s position is determined              
         as of the earlier of the date of the receipt by the taxpayer of              
         the notice of the decision of the Appeals Office or the date of              
         the notice of deficiency, which in this case was June 14, 2004.              
         Sec. 7430(c)(7)(B).                                                          
              Under section 7430(c)(4), our application of the                        
         substantially justified standard in a litigated case is limited              
         to the period beginning with the point at which the                          
         Commissioner’s counsel has become involved.  Sher v.                         
         Commissioner, 89 T.C. at 86.  This would normally take place when            
         the Commissioner answered the petition.  Id.  However, in a small            

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