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justified if they have a reasonable basis in both law and fact.
Maggie Mgmt. Co. v. Commissioner, 108 T.C. 430, 443 (1997).
In the instant case, we conclude that respondent’s position
was both reasonable and substantially justified in both the
administrative and judicial proceedings. Petitioner failed to
provide the requisite documentation until after respondent issued
the notice of deficiency and filed an answer. Deductions are a
matter of legislative grace, and petitioner must prove he is
entitled to the deductions. Rule 142(a); New Colonial Ice Co. v.
Helvering, 292 U.S. 435, 440 (1934). In the absence of any proof
of entitlement to the disputed deductions, respondent was
reasonable to maintain his position that the disputed deductions
were not allowed. Prouty v. Commissioner, T.C. Memo. 2002-175.
It was not until February 18, 2006, that Ms. Tyrrell sent the
documentation relating to the disputed deductions to Mr. Mann.5
Respondent conceded the propriety of the deductions upon
5Respondent also contends that petitioner protracted the
instant proceedings and is therefore ineligible for cost
recovery. Sec. 7430(b)(3). Although we do not address that
issue, since we have disposed of the instant motion on other
grounds, we note that petitioner did not provide the required
documentation to support his claimed deductions until less than
2 months before trial. Once in possession of the requested
documentation, respondent presumably would have conceded the
deductions at any point in the administrative or litigation
process, as respondent ultimately did on the eve of trial after
receiving the documentation. Consequently, petitioner forced an
administrative proceeding and litigation, instead of a brief
exchange of correspondence.
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