- 29 -
Huffman v. Commissioner, 978 F.2d 1139, 1147 n.8 (9th Cir. 1992),
affg. in part, revg. in part, and remanding T.C. Memo. 1991-144.
Respondent’s position may be incorrect and yet be substantially
justified “if a reasonable person could think it correct”.
Pierce v. Underwood, 487 U.S. at 566 n.2.
Whether respondent acted reasonably in the instant case
ultimately turns on the available information which formed the
basis for respondent’s position, as well as on the law relevant
to the instant case. Coastal Petroleum Refiners v. Commissioner,
94 T.C. 685, 688-690 (1990).
The fact that respondent eventually loses or concedes a case
does not by itself establish that respondent’s position is
unreasonable. Maggie Management Co. v. Commissioner, 108 T.C.
430, 443 (1997). However, it is a factor that may be considered.
Idem.
In determining whether respondent’s position was
substantially justified, the question is whether respondent knew
or should have known that the Government’s position was invalid
16(...continued)
232 n.9 (1997). Accordingly, we consider the holding in Pierce
v. Underwood, supra, to be applicable to the case before us.
Also, the “substantially justified” standard is not a
departure from the reasonableness standard of pre-1986 law.
Huffman v. Commissioner, 978 F.2d 1139, 1147-1148 (9th Cir.
1992), affg. in part, revg. in part, and remanding T.C. Memo.
1991-144. Accordingly, we consider the holdings of pre-1986 law
on reasonableness to be applicable to the case before us, except
as to the question of which party has the burden of proof.
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