Kevin A. Goon - Page 5

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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 March 16, 2006, that petitioner sent the                   
          documentation relating to the disputed deductions to Mr. Mann.5             
          Respondent conceded the propriety of the deductions upon receipt            

               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 a           
          month 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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