Gabino Diaz - Page 5

          prevailing party; (2) exhausted available administrative                    
          remedies; and (3) did not unreasonably protract the court                   
          proceedings.  Sec. 7430(a) and (b)(1), (3).                                 
               Under section 7430(c)(4)(A), a “prevailing party” is defined           
          as a party who has substantially prevailed with respect to the              
          amount in controversy or who has substantially prevailed with               
          respect to the most significant issue or set of issues and who              
          meets certain net worth requirements.  Sec. 7430(c)(4)(A).  If              
          respondent establishes that respondent’s position in the                    
          proceeding was substantially justified, the taxpayer will not be            
          treated as a prevailing party.  Sec. 7430(c)(4)(B).  Whether                
          respondent’s position was substantially justified depends on                
          whether his position was supported by a reasonable basis in law             
          and fact.  Pierce v. Underwood, 487 U.S. 552 (1988); Rickel v.              
          Commissioner, 900 F.2d 655, 665 (3d Cir. 1990), affg. in part and           
          revg. in part on other grounds 92 T.C. 510 (1989).                          
               The fact that respondent eventually loses or concedes an               
          issue or issues does not by itself establish that respondent’s              
          position was unreasonable.  Maggie Mgmt. Co. v. Commissioner, 108           
          T.C. 430, 443 (1997).                                                       
               Whether respondent acted reasonably turns largely on the               
          basis of the available information used to form respondent’s                
          position and whether respondent knew or should have known that              
          his position was invalid at the time respondent took the position           

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