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Notwithstanding a taxpayer’s satisfaction of the prevailing
party requirements of section 7430(c)(4)(A), section
7430(c)(4)(B)(i) provides that a taxpayer is not treated as the
prevailing party if the United States establishes that its
position in the court proceeding was substantially justified.
Accordingly, the Commissioner has the burden of proof on the
issue of whether the Commissioner’s position was substantially
justified. To be considered substantially justified, the
Commissioner’s position must be justified to a degree that could
satisfy a reasonable person and must have a reasonable basis in
both law and fact. Corkrey v. Commissioner, 115 T.C. 366, 373
(2000). In deciding whether the Commissioner acted reasonably,
we consider both the basis for the Commissioner’s legal position
and the manner in which the position was maintained. Id. at 373.
The mere fact that the Commissioner loses a case does not
establish that the Commissioner’s position was unreasonable, but
the loss of the case may be considered as a factor. Maggie Mgmt.
Co. v. Commissioner, 108 T.C. 430, 443 (1997).
Generally, the Commissioner’s position in a court proceeding
is established in the Commissioner’s answer to the petition. See
Huffman v. Commissioner, 978 F.2d 1139, 1148 (9th Cir. 1992),
affg. in part, revg. in part and remanding T.C. Memo. 1991-144;
Maggie Mgmt. Co. v. Commissioner, supra at 442. In the instant
case, the petition in relevant part states that the
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