Neil Malcolm Cowie and Karen Christine Shunk - Page 5



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                                   Discussion                                         
               The prevailing party in a Tax Court proceeding may be                  
          entitled to recover administrative and litigation costs.  See sec.          
          7430(a); Rule 231.  However, a taxpayer will not be treated as the          
          prevailing party if the Commissioner’s position was substantially           
          justified.  Sec. 7430(c)(4)(B); see Pierce v. Underwood, 487 U.S.           
          552, 565 (1988).  The fact that the Commissioner concedes is not            
          determinative of the reasonableness of the Commissioner’s                   
          position.  Wasie v. Commissioner, 86 T.C. 962, 969 (1986).  The             
          taxpayer bears the burden of proving he meets the requirements in           
          section 7430 for an award of costs, except that the taxpayer will           
          not be treated as the prevailing party if the Commissioner                  
          establishes that the position of the Commissioner was                       
          substantially justified.  See Rule 232(e).                                  
               The Court determines the reasonableness of respondent’s                
          position as of the time respondent took the position.  Sec.                 
          7430(c)(7).  Respondent took a position in the administrative               
          proceeding as of the date of the notice of deficiency.  Sec.                
          7430(c)(7)(B).  In the judicial proceeding, respondent took a               
          position when respondent filed the answer.  Sec. 7430(c)(7)(A);             
          Huffman v. Commissioner, 978 F.2d 1139, 1144-1147 (9th Cir. 1992),          
          affg. in part, revg. in part on other grounds and remanding T.C.            
          Memo. 1991-144.  Respondent’s administrative and litigation                 
          positions are substantially justified if they have a reasonable             






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