David A. Demetree - Page 4

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          reasonable basis in law and fact).  Sec. 7430(c)(4)(B); see                 
          Pierce v. Underwood, 487 U.S. 552, 565 (1988).  Respondent                  
          concedes that petitioners have substantially prevailed with                 
          respect to the amount in controversy but contends that his                  
          position was substantially justified.                                       
               Respondent’s position on the date he issued the notices of             
          deficiency and after filing his answers with this Court is                  
          relevant in determining whether respondent was substantially                
          justified.  Grant v. Commissioner, 103 F.3d 948, 952 (11th Cir.             
          1996), affg. T.C. Memo. 1995-374.  The fact that respondent loses           
          an issue is not determinative of the reasonableness of his                  
          position.  Wasie v. Commissioner, 86 T.C. 962, 969 (1986).                  
               On the date respondent issued the notices of deficiency and            
          after filing his answers, respondent maintained the position that           
          David failed to report income he received from his parents and              
          Ms. Hinkle.  Indeed, David’s bank statements, relating to the               
          years in issue, delineated numerous deposits that were not                  
          included in his gross income.  Thus, respondent’s position, which           
          was based upon the information available to him at the time he              
          took a position in the administrative and judicial proceedings,             
          was substantially justified and reasonable.  The fact that                  
          petitioners established at trial that the transfers from David’s            
          parents and Ms. Hinkle were gifts and loans to David and his                

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