Ronald A. Horton - Page 10

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         in May 2004, relating to the 2002 taxable year, were useful but              
         not sufficient to invalidate respondent’s position as to the 2003            
         taxable year.  Each taxable year stands on its own and must be               
         separately considered.  See United States v. Skelly Oil Co., 394             
         U.S. 678 (1969).                                                             
              Respondent’s position was substantially justified until                 
         December 9, 2004, when petitioner provided respondent with                   
         relevant information related to the 2003 taxable year.  The                  
         Commissioner has a reasonable period to analyze submitted                    
         documentation and modify his position accordingly.  Sokol v.                 
         Commissioner, supra at 765-766.  We note that respondent promptly            
         settled all issues related to the 2003 taxable year after                    
         petitioner’s claims were substantiated.                                      
              We conclude that respondent’s position was substantially                
         justified under section 7430(c)(4)(B).  Respondent was unaware               
         that his position was invalid because he had yet to receive                  
         sufficient information necessary to make an appropriate                      
         determination as to petitioner’s 2003 taxable year.  Moreover,               
         the parties did not reach a final settlement regarding                       
         petitioner’s 2002 taxable year until more than 3 months after the            
         2003 notice of deficiency was issued.                                        
              We also note that in his motion petitioner has apparently               
         intermingled services which were rendered for both the 2002 and              

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