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The Commissioner’s position is substantially justified if,
on the basis of all the facts and circumstances and legal
precedent, the Commissioner acted reasonably. Pierce v.
Underwood, supra; Sher v. Commissioner, 89 T.C. 79, 84 (1987),
affd. 861 F.2d 131 (5th Cir. 1988). In other words, the
Commissioner’s position must have a reasonable basis in both law
and fact. Pierce v. Underwood, supra. A position is
substantially justified if the position is “justified to a degree
that could satisfy a reasonable person”. Id. at 565. The
Commissioner’s position may be incorrect but still be
substantially justified if “‘a reasonable person could think it
correct’”. Maggie Mgmt. Co. v. Commissioner, 108 T.C. 430, 443
3(...continued)
million net worth limitation of 28 U.S.C. sec. 2412(d)(2)(B), we
note that, while petitioner incurred an approximate $26 million
loss in April 2000, he also received approximately $35 million in
taxable years 1999 and 2000 resulting in a net gain of almost $9
million for those taxable years. In his affidavit, petitioner
listed assets totaling $3,074,552, but claims that his net worth
when he filed the petition on July 21, 2004, was a negative
$575,844 after subtracting a $3,692,356 tax liability, which
petitioner computed based on our Opinion in Vines I on May 11,
2006. We also note that respondent contends that petitioner used
the wrong method to value certain assets listed in petitioner’s
affidavit. If we were to consider these issues, we would require
further evidence, and possibly a hearing, in order to decide
whether petitioner meets the $2 million net worth limitation of
28 U.S.C. sec. 2412(d)(2)(B).
We also note that petitioner has not shown that he qualifies
for the higher $7 million net worth limitation under 28 U.S.C.
sec. 2412(d)(2)(B) because petitioner presented no evidence that,
on the date he filed his petition, he was the owner of an
unincorporated business.
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