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may be entitled to reasonable costs incurred in connection with
the court proceeding. Sec. 7430(a)(1) and (2), (c)(1).
Respondent concedes that petitioner has established all of the
requirements except for the requirement that petitioner be a
prevailing party.
To be a prevailing party, the taxpayer must substantially
prevail with respect to either the amount in controversy or the
most significant issue or set of issues presented, and satisfy
the applicable net worth requirements under 28 U.S.C. section
2412(d)(2)(B)(2000). Sec. 7430(c)(4)(A). The taxpayer will
nevertheless not be treated as a prevailing party if the
Commissioner’s position in the court proceeding was substantially
justified. Sec. 7430(c)(4)(B). The Commissioner has the burden
of proving that his position was substantially justified. See
sec. 7430(c)(4)(B)(i); Rule 232(e).
Respondent concedes that petitioner has satisfied the
requirements of section 7430(c)(4)(A). Respondent contends,
however, that petitioner should not be treated as a prevailing
party, because respondent’s position in the court proceeding was
substantially justified.
Substantial Justification
The Commissioner’s position is substantially justified if,
based on all of the facts and circumstances and the legal
precedent relating to the case, the Commissioner acted
reasonably. See Pierce v. Underwood, 487 U.S. 552 (1988);
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Last modified: May 25, 2011