- 8 -
proceedings, prevailed with respect to the amount in controversy,
and met the net worth requirements. Respondent contends,
however, that (1) his position was substantially justified, (2)
petitioners did not pay or incur attorney’s fees, and (3) to the
extent petitioners did pay or incur attorney’s fees, the amounts
claimed are not reasonable.
II. Whether Respondent’s Position Was Substantially Justified
The Commissioner’s position is substantially justified if,
based on all of the facts and circumstances and the legal
precedents relating to the case, 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). The
Commissioner bears the burden of proving his position had a
reasonable basis in both fact and law. Sec. 7430(c)(4)(B);
Pierce v. Underwood, supra; 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).
We adopt an issue-by-issue approach to the awarding of costs
under section 7430, apportioning the requested award of fees
among the issues according to whether the Commissioner’s position
on a particular issue was substantially justified. See Swanson
v. Commissioner, 106 T.C. 76, 102 (1996); Hennessey v.
Commissioner, T.C. Memo. 2007-131. Although the notice of
deficiency contained other adjustments, the parties’ disagreement
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: November 10, 2007