T.C. Memo. 1995-564
UNITED STATES TAX COURT
HENRY P. AND DARLENE C. BRANTLEY, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10128-94. Filed November 28, 1995.
William J. Irvin and Stephen Gregory Reardon, for petitioners.
Scott Anderson, John C. Donovan, and Thomas D. Moffitt, for
respondent.
MEMORANDUM OPINION
JACOBS, Judge: This matter is before the Court on
petitioners' Motion for Litigation and Administrative Costs
pursuant to section 7430 and Rule 231. All section references are
to the Internal Revenue Code in effect for the matter under
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consideration, and all Rule references are to the Tax Court Rules
of Practice and Procedure.
The substantive issue which gave rise to petitioners' motion
involves the 1990 cancellation of a $228,000 note owed by Henry P.
Brantley (petitioner) to Elite Coatings Company, Inc. (Elite), and
whether such cancellation resulted in discharge of indebtedness
income to petitioners pursuant to section 61(a)(12). Respondent
conceded this issue when this case was called for trial on March
20, 1995, in Richmond, Virginia.
The parties have submitted affidavits and memoranda supporting
their positions. Neither party requested an evidentiary hearing.
We decide the matter before us based on petitioners' Motion for
Litigation and Administrative Costs, respondent's objection to
petitioners' motion, petitioners' response and supplemental
response to respondent's objection, respondent's reply to
petitioners' response, and the affidavits and exhibits provided by
the parties. See Rule 232(a)(3).
Petitioners failed to present the facts surrounding the
cancellation of Henry P. Brantley's debt to Elite in a
comprehensive manner. Nevertheless, we attempt to succinctly set
forth below those pertinent facts (as we understand them) required
to resolve the motion before us. In doing so, we have simplified
a complex series of events with regard to petitioner's acquisition
of Elite stock and the ultimate cancellation of petitioner's debt
to Elite in connection with such stock acquisition.
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Background
Petitioners Henry P. and Darlene C. Brantley resided in
Milledgeville, Georgia, at the time they filed their petition in
this case.
Petitioner is a chemical engineer. He was employed at all
relevant times by Elite, a Georgia corporation that produced and
sold paint and allied products.
In June 1985, petitioner wrote two checks totaling $72,000
(one to Hargis Enterprises, Inc. (H. Enterprises) and the other to
Gary W. Hargis) with respect to a "business agreement".
Apparently, this "business agreement" related to petitioner's
prospective ownership in Elite. At the time the checks were
issued, H. Enterprises and Mr. Hargis owned all of the stock of
Elite. Mr. Hargis was sole shareholder, president, and director of
H. Enterprises.
In the latter part of 1987, petitioner acquired 49 percent of
the outstanding stock of Elite. The record does not reveal from
whom (H. Enterprises, Mr. Hargis, or Elite) petitioner acquired the
stock. Petitioner paid $300,000 for his 49-percent ownership
interest. This amount consisted of $72,000 (which he had paid to
Mr. Hargis and H. Enterprises in 1985) and a $228,000 promissory
note to Elite.
At the time of the acquisition, representations were made to
petitioner that Elite's value exceeded $600,000 and that its plant
was in good physical condition. These representations proved
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false; at the time petitioner acquired the stock, Elite had a
negative net worth and its plant was in poor physical condition.
On April 2, 1990, H. Enterprises, Mr. Hargis, Elite, and
petitioner entered into an agreement pursuant to which, among other
matters, petitioner purchased an additional 2 percent of Elite
stock from H. Enterprises. As part of the agreement, Elite
forgave all debts owed it by H. Enterprises, Mr. Hargis, and
petitioner, including petitioner's $228,000 note to Elite.
Subsequently, on April 19, 1990, Elite redeemed all of its
stock owned by H. Enterprises. As a result of this redemption,
petitioner owned 100 percent of Elite stock.
Furthermore, on April 19, 1990: (1) H. Enterprises and Mr.
Hargis sold to Elite their interest in patents, trademarks,
servicemarks, logos, trade names, formulas, and paint formulations;
and (2) Mr. Hargis entered into a noncompetition agreement with
Elite.
Administrative Proceeding
The examination of petitioners' 1990 Federal income tax return
began as an offshoot of an audit of H. Enterprises and Elite. The
revenue agent questioned whether petitioners should have reported
the cancellation of the $228,000 debt as income on their 1990
return.1
1
Gross income includes income from the discharge of
indebtedness. Sec. 61(a)(12). A taxpayer may realize discharge
of indebtedness income by paying an obligation at less than its
(continued...)
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Throughout the administrative proceeding, petitioners
maintained that they did not receive income from the cancellation
of the $228,000 note. They stated that the revenue agent erred
when he determined that the cancellation of petitioner's note to
Elite on April 2, 1990, was connected to Elite's redemption of its
stock from H. Enterprises on April 19, 1990. Petitioners
contended that the cancellation of petitioner's debt to Elite was,
in essence, a reduction of the $300,000 purchase price for Elite's
stock to reflect Elite's correct value pursuant to section
108(e)(5)2 or as a setoff for damages because of misrepresentations
1
(...continued)
face value. United States v. Kirby Lumber Co., 284 U.S. 1
(1931). A reduction in debt without a corresponding reduction in
assets causes an economic gain and income to the debtor because
assets are no longer encumbered. Generally, a cancellation of
indebtedness produces income to the debtor in an amount equal to
the difference between the amount due on the obligation and the
amount paid for the discharge. If no consideration is paid for
the discharge, then the entire amount of the debt is in most
circumstances considered the amount of income that the debtor
must include in income. Sec. 61(a)(12); Babin v. Commissioner,
23 F.3d 1032, 1034 (6th Cir. 1994), affg. T.C. Memo. 1992-673.
2
Sec. 108(e)(5) provides:
SEC. 108. INCOME FROM DISCHARGE OF INDEBTEDNESS.
* * * * * * *
(e) General Rules for Discharge of Indebtedness (Including
Discharges Not in Title 11 Cases or Insolvency).--For
purposes of this title--
* * * * * * *
(5) Purchase-money debt reduction for solvent debtor
(continued...)
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made to petitioner. Alternatively, petitioners argued that
petitioner was insolvent at the time the note was discharged, and,
as a result, the amount of the discharged indebtedness was not
includable in income pursuant to section 108(a)(1)(B).3
2
(...continued)
treated as price reduction.--If--
(A) the debt of a purchaser of property to
the seller of such property which arose out of the
purchase of such property is reduced,
(B) such reduction does not occur--
(i) in a title 11 case, or
(ii) when the purchaser is insolvent,
and
(C) but for this paragraph, such reduction
would be treated as income to the purchaser from
the discharge of indebtedness,
then such reduction shall be treated as a purchase price
adjustment.
Sec. 108(e)(5) was enacted "to eliminate disagreements
between the Internal Revenue Service and the debtor as to
whether, in a particular case to which the provision applies, the
debt reductions should be treated as discharge income or a true
price adjustment." S. Rept. 96-1035 (1980), 1980-2 C.B. 620,
628. In order for a reduction in the amount of a debt to be
treated as a purchase price adjustment pursuant to sec.
108(e)(5), the following conditions must be met: (1) The debt
must be that of a purchaser of property to the seller that arose
out of the purchase of such property; (2) the taxpayer must be
solvent and not in bankruptcy when the debt reduction occurs; and
(3) except for section 108(e)(5), the debt reduction would
otherwise have resulted in discharge of indebtedness income.
Sec. 108(e)(5); 1 Bittker & Lokken, Federal Taxation of Income,
Estates and Gifts, pp. 6-40 to 6-41 (2d ed. 1989); Juister v.
Commissioner, T.C. Memo. 1987-292, affd. without published
opinion 875 F.2d 864 (6th Cir. 1989).
3
Gross income does not include discharge of indebtedness
income if the discharge occurs when the taxpayer is insolvent.
(continued...)
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The revenue agent requested petitioners to produce pertinent
information regarding the stock transfer and cancellation of
indebtedness, as well as the circumstances surrounding these
events. Petitioners failed to do so.
The revenue agent did not possess sufficient facts to
understand the 1987 and 1990 transactions that transferred stock
ownership of Elite from Mr. Hargis to petitioner. The documentary
evidence that the agent possessed indicated that after the two
April 1990 transactions, petitioner was the owner of all the
outstanding Elite stock and no longer was indebted to Elite.
Because the parties were unable to reach an agreement with
respect to the discharge of indebtedness income, respondent issued
a notice of deficiency on March 11, 1994. Respondent determined a
$70,355 deficiency in petitioners' 1990 Federal income tax and a
$14,071 accuracy-related penalty pursuant to section 6662(a).
3
(...continued)
Sec. 108(a)(1)(B). The amount of discharge of indebtedness
income excluded from gross income may not exceed the amount of
the taxpayer's insolvency. Sec. 108(a)(3). A taxpayer is
insolvent when his liabilities exceed the fair market value of
his assets immediately before the discharge. Sec. 108(d)(3). If
an insolvent taxpayer's debt is discharged, no income is realized
because the discharge of indebtedness does not make assets
available to the debtor. Quinn v. Commissioner, 31 B.T.A. 142,
145 (1934); cf. United States v. Kirby Lumber Co., 284 U.S. 1
(1931). However, a debtor who is insolvent before the discharge
realizes income to the extent such discharge renders him solvent.
Conestoga Transp. Co. v. Commissioner, 17 T.C. 506, 513 (1951);
Texas Gas Distrib. Co. v. Commissioner, 3 T.C. 57, 61-62 (1944).
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Judicial Proceeding
Petitioners filed a petition in this Court on June 14, 1994.4
Their petition reiterated the arguments enunciated during the
administrative proceeding.
On June 22, 1994, an attorney in respondent's Richmond,
Virginia, office was assigned this case. Respondent's answer,
filed on July 22, 1994, denied petitioners' allegations for lack of
sufficient information.
On February 1, 1995, respondent's counsel sent a letter to
petitioners' counsel summarizing respondent's position that (1)
section 108(a)(1)(B) is not applicable because petitioner was not
insolvent in April 1990, and (2) the debt forgiveness does not
qualify as a section 108(e)(5) purchase price adjustment. In the
letter, respondent's counsel asked that the parties begin
stipulating facts, and stated that the documents provided by
petitioners "present a confusing picture" with regard to
petitioner's acquisition of Elite stock.
Petitioners' claim of insolvency at the time the stock was
transferred was based on a financial statement petitioners prepared
as of April 1990. That statement reflects a negative net worth of
$229,700. However, respondent's counsel did not agree with certain
aspects of the financial statement: (1) Petitioner's Elite stock is
valued at only $100, while the full amount of his $228,000 note to
4
The petition was timely mailed on June 9, 1994. Sec.
7502(a).
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Elite is shown as a liability; and (2) petitioner's half-interest
in petitioners' residence is listed as an asset, while the full
amount of the residential mortgage is shown as a liability.
Respondent's counsel contended that an accurate financial statement
would show that petitioner was in fact solvent in April 1990
because Elite owned valuable equipment, patents, and real
property.5
Respondent's counsel was uncertain whether section 108(e)(5)
applied because it was not clear from whom petitioner acquired his
Elite stock. Petitioners never provided respondent's counsel with
Elite's stock record book. Respondent's counsel believed that
section 108(e)(5) would apply only if Elite had sold the stock to
petitioner. In addition, section 108(e)(5) requires petitioner to
have been solvent in April 1990.
Finally, respondent's counsel believed that petitioner
acquired all of the Elite stock through a series of agreements in
which valuable property and rights to property were transferred to
Mr. Hargis and entities that he controlled in exchange for his
Elite stock. Petitioners' claim that the Elite stock was worthless
was belied by the hard-bargained series of deals.
On February 16, 1995, counsel for petitioners and respondent
met to discuss the case. Petitioners' counsel for the first time
provided respondent's counsel with factual background to the
5
An Oct. 3, 1989, letter states that Elite was worth
approximately $1,250,000.
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documents that petitioners had earlier presented. Petitioners'
counsel related the following information to respondent's counsel
during the meeting.
1. Petitioner is a chemical engineer whose specialty is
paint. In 1990 he was employed by Elite, a company that developed,
produced, and sold special application paints for bridges,
ironwork, and railroad rolling stock. Until 1987, Elite was a
wholly owned subsidiary of H. Enterprises.
2. Prior to 1987, petitioner had loaned funds or had not
received salary so that Elite essentially owed him $72,000. In
1987, Elite issued petitioner 49 percent of the outstanding stock.
In return, petitioner contributed $72,000 to Elite and signed an
interest-bearing note for $228,000. Petitioner expected to pay the
note with future Elite dividends. However, Elite did not pay
dividends because its excess cash was "siphoned off" by Mr. Hargis.
As a result of the transfer of stock in 1987, Elite was no longer
able to file a consolidated return and began to file its own income
tax returns.
3. Through two separate agreements entered into in April
1990, Elite canceled the $228,000 note, and petitioner acquired the
remaining outstanding shares of Elite stock. Central to the change
in ownership, but not part of the agreements, was a refinancing
arrangement whereby the financial backer of the corporation was
replaced.
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4. Petitioner was the engineer who ran Elite. He believed
that he could make a profit selling specialty paint. Mr. Hargis
and his various enterprises were "siphoning off" a great deal of
Elite's profit. By 1990, petitioner "wanted out". Mr. Hargis was
financially unstable and was pressured by the financial backer to
personally repay Elite's line of credit. The new financial backer
agreed to provide financing for the corporation only if Mr. Hargis
was no longer involved in the operation. The agreements through
which petitioner acquired the remaining Elite stock was a way for
petitioner to "get rid" of Mr. Hargis by transferring real and
personal property Elite owned with a value of approximately
$150,000. Mr. Hargis received the property in return for his
remaining interest in a corporation that was not going to survive
without new working capital (which was unavailable while he was an
owner). As a result of the presence of the new financial backer,
Mr. Hargis was relieved of his personal guarantee of Elite's loans.
5. In exchange for taking over Elite's debt, the new
financial backer received a steady source of a product he needed
from a more stable company run and owned by a person he admired and
trusted. The new financial backer believed that petitioner would
be required to guarantee the new financial backer's loans to Elite
but due to a mistake, petitioner was not asked for his guarantee
until after the new financial backer came into the picture.
Petitioner then refused to become a guarantor.
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Petitioners' counsel informed respondent's counsel that
petitioner and the new financial backer would testify to the above
facts. Respondent's counsel determined that no one was available to
contradict petitioners' position.
Thus, it was at the February 16, 1995, meeting that
respondent's counsel "was presented with a logical explanation" for
the first time as to why Mr. Hargis "gave" petitioner 51 percent of
the Elite stock. Also, on February 24, 1995, petitioners provided
respondent with numerous documents.
After considering the explanation offered at the February 1995
meeting and the newly acquired documents, respondent's counsel
decided to settle the case by allowing petitioners to treat the
cancellation of indebtedness as a purchase-money debt reduction
pursuant to section 108(e)(5) so that petitioner's basis in the
stock of Elite would be $72,000. Respondent's counsel informed
petitioners of the concession on March 13, 1995.
Respondent's counsel settled this case on March 13, 1995, for
the following reasons: (1) Petitioners' counsel's explanation of
the transactions in February 1995, together with the recently
acquired documents, provided a more complete account of the
transactions; (2) respondent's counsel did not have any evidence
other than the documents to refute petitioners' explanation; (3) it
was unclear that the Court would not consider Elite rather than H.
Enterprises to be the seller of the stock and apply section
108(e)(5) to treat the cancellation of indebtedness as a reduction
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in purchase price; and (4) the "hazards of litigation".
Accordingly, when this case was called for trial on March 20, 1995,
respondent's counsel informed the Court that a basis for settlement
had been reached and that respondent was conceding the case.
On June 8, 1995, petitioners filed a Motion for Litigation and
Administrative Costs in the total amount of $19,483.51, and a $60
filing fee.
Discussion
A prevailing party may be awarded a judgment for reasonable
litigation costs incurred in connection with a Court proceeding
pursuant to section 7430, as amended by the Technical and
Miscellaneous Revenue Act of 1988, Pub. L. 100-647, sec. 6239, 102
Stat. 3342, 3743-3746 (applicable to petitions filed after November
10, 1988). See also Rule 231. The petition in this case was filed
on June 14, 1994.
An individual taxpayer must meet seven requirements in order
to be awarded reasonable litigation and administrative costs under
section 7430. The taxpayer must:
(1) Timely file a motion for litigation and administrative
costs. Rule 231(a). Petitioners met this requirement.
(2) Substantially prevail in the proceeding in this Court.
Sec. 7430(c)(4)(A)(ii). Respondent concedes that petitioners met
this requirement.
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(3) Not unreasonably protract the administrative proceeding
or the proceeding in this Court. Sec. 7430(b)(4). Respondent
concedes that petitioners met this requirement.
(4) Establish that respondent's positions in the
administrative proceeding and the proceeding in this Court were not
substantially justified in law or in fact. Sec. 7430(c)(4)(A)(i),
(7)(A) and (B); Pierce v. Underwood, 487 U.S. 552, 564-565 (1988);
Huffman v. Commissioner, 978 F.2d 1139, 1143-1147 (9th Cir. 1992),
affg. in part, revg. in part on other grounds, and remanding T.C.
Memo. 1991-144; Sliwa v. Commissioner, 839 F.2d 602, 606 (9th Cir.
1988); Powers v. Commissioner, 100 T.C. 457, 470 (1993). As
discussed below, we hold that petitioners did not meet this
requirement.
(5) Exhaust any administrative remedies available in the
IRS.6 Sec. 7430(b)(1). Respondent concedes that petitioners met
this requirement.
(6) Have a net worth that did not exceed $2 million at the
time the petition was filed in the case. Sec. 7430(c)(4)(A)(iii);
28 U.S.C. sec. 2412(d)(2)(B) (1988). Respondent concedes that
petitioners met this requirement.
(7) Establish that the amount of costs claimed is reasonable.
Sec. 7430(a), (c)(1) and (2). Because of our disposition of
petitioners' motion, we do not reach this issue.
6
This requirement only applies to a judgment for an
award of reasonable litigation costs. Sec. 7430(b)(1).
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Petitioners must establish all of the above requirements
before the Court may award litigation and administrative costs
under section 7430. Minahan v. Commissioner, 88 T.C. 492, 497
(1987); Han v. Commissioner, T.C. Memo. 1993-386. Petitioners have
the burden of proof with respect to each and every requirement.
Rule 232(e); Welch v. Helvering, 290 U.S. 111, 115 (1933); Gantner
v. Commissioner, 92 T.C. 192, 197 (1989), affd. 905 F.2d 241 (8th
Cir. 1990).
The "not substantially justified" standard under section 7430
is applied as of the separate dates that respondent took positions
in the administrative proceeding and the proceeding in this Court.
Sec. 7430(c)(7)(A) and (B); Huffman v. Commissioner, supra; Han v.
Commissioner, supra. For purposes of the administrative
proceeding, respondent took a position on March 11, 1994, the date
of the notice of deficiency. Sec. 7430(c)(7)(B). For purposes of
the proceeding in this Court, respondent took a position on July
22, 1994, the date respondent filed the answer. See Huffman v.
Commissioner, supra at 1148. These two positions are virtually
identical; there is no evidence in the record that respondent's
position changed from the time she issued the notice of deficiency
until after the February 1995 meeting when petitioners provided
respondent with pertinent facts surrounding the transactions.
Whether or not this position was substantially justified will
determine whether petitioners are entitled to an award of
reasonable litigation and administrative costs.
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In 1986, Congress changed the language describing the position
of the United States from "unreasonable" to "not substantially
justified", the standard applicable to the Equal Access to Justice
Act, 28 U.S.C. sec. 2412 (1988). Tax Reform Act of 1986, Pub. L.
99-514, sec. 1551, 100 Stat. 2752; H. Conf. Rept. 99-841, at II-801
(1986), 1986-3 C.B. (Vol. 4) 801. This Court has held that the
substantially justified standard does not represent a departure
from the reasonableness standard. Sher v. Commissioner, 89 T.C.
79, 84 (1987), affd. 861 F.2d 131 (5th Cir. 1988), and cases cited
therein; see also Pierce v. Underwood, supra at 563-565.
"Substantially justified" means "justified to a degree that
could satisfy a reasonable person" both as a matter of fact and
law. Pierce v. Underwood, supra at 565. That interpretation also
applies to motions for litigation costs under section 7430.
William L. Comer Family Equity Pure Trust v. Commissioner, 958 F.2d
136, 139-140 (6th Cir. 1992), affg. per curiam T.C. Memo. 1990-316;
Norgaard v. Commissioner, 939 F.2d 874, 881 (9th Cir. 1991), affg.
in part and revg. in part T.C. Memo. 1989-390. For a position to
be substantially justified, there must be "substantial evidence" to
support it. Pierce v. Underwood, supra at 564-565. In deciding
whether the Commissioner's position was substantially justified,
the Court will consider not only the basis of the Commissioner's
legal position, but also the manner in which the Commissioner
maintained that position. Wasie v. Commissioner, 86 T.C. 962, 969
(1986).
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Respondent argues that her administrative and judicial
position regarding petitioner's 1990 discharge of indebtedness was
substantially justified. Petitioners disagree.
With regard to the administrative proceeding, the revenue
agent encountered several significant factual inconsistencies.
Petitioners bore the burden of establishing that the section
108(a)(1)(B) or (e)(5) exception applied. Rule 142(a); Welch v.
Helvering, 290 U.S. 111 (1933). Because it was unclear whether
petitioner was insolvent at the time the debt was canceled, it was
impossible to determine whether section 108(a)(1)(B) applied.
Neither were there sufficient facts to establish that section
108(e)(5) applied. If petitioner was solvent, there was no
evidence that the reduced debt was the debt "of a purchaser of
property to the seller of such property". Sec. 108(e)(5).
In effect, petitioners acted as if the burden of establishing
the facts of the case were on respondent. It is not unreasonable
for the Commissioner to require a taxpayer to corroborate its
claims regarding a dispositive and unresolved fact. Baker v.
Commissioner, 83 T.C. 822, 830 (1984), vacated and remanded on
another issue 787 F.2d 637 (D.C. Cir. 1986); Fallin v.
Commissioner, T.C. Memo. 1993-332; Caparaso v. Commissioner, T.C.
Memo. 1993-255. The Commissioner was not required to concede this
case before she received the requested documentation necessary to
prove petitioners' contentions. See Brice v. Commissioner, T.C.
Memo. 1990-355, affd. without published opinion 940 F.2d 667 (9th
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Cir. 1991). In sum, we hold that respondent's position in the
administrative proceeding, i.e., issuance of the notice of
deficiency, was substantially justified.
Respondent's position in the judicial proceeding also was
substantially justified. As of the date she filed the answer (July
22, 1994), respondent had not received any further information from
petitioners. It was reasonable for respondent's answer to reassert
the position taken in the notice of deficiency. Petitioners had to
prove that the discharge of indebtedness did not create gross
income. Rule 142(a). However, as of July 22, 1994, they had not
developed the facts necessary to show that either section
108(a)(1)(B) or (e)(5) applied. It was not until February 1995
that petitioners more fully presented their case. At that time,
respondent's counsel reevaluated the case, weighing the evidence
presented as well as the costs of litigation. After reviewing the
additional information offered by petitioners, respondent's counsel
expeditiously conceded the case. Having considered all the
evidence before us, we hold that there was sufficient doubt as to
the applicability of the mutually exclusive section 108(a)(1)(B)
and (e)(5) to substantially justify the position taken by
respondent in both the notice of deficiency and the answer.
Petitioners have failed to prove that respondent's position was not
substantially justified.
The fact that the Commissioner eventually loses or concedes a
case is not sufficient to establish that a position is not
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substantially justified. Sokol v. Commissioner, 92 T.C. 760, 767
(1989). To rule otherwise would "not only distort the truth but
penalize and thereby discourage useful settlements." Pierce v.
Underwood, supra at 568. The reasonableness of the Commissioner's
position necessarily requires considering what the Commissioner
knew at the time. Cf. Rutana v. Commissioner, 88 T.C. 1329, 1334
(1987); DeVenney v. Commissioner, 85 T.C. 927, 930 (1985).
Respondent's position was reasonable in light of the issue
presented and the information that was available to her during the
administrative and judicial proceedings. See, e.g., Harrison v.
Commissioner, 854 F.2d 263 (7th Cir. 1988)(concession approximately
6 months after answer filed, after respondent had an opportunity to
verify information, held reasonable), affg. T.C. Memo. 1987-52;
Wickert v. Commissioner, 842 F.2d 1005 (8th Cir. 1988) (concession
10 days after filing of answer, although it took several months to
draft the stipulation of settlement, held to be reasonable), affg.
T.C. Memo. 1986-277; Ashburn v. United States, 740 F.2d 843 (11th
Cir. 1984)(11-month delay in conceding case not unreasonable
because the issues were not simple); White v. United States, 740
F.2d 836, 842 (11th Cir. 1984)(concession of issue 3 months after
issue raised was reasonable).
In conclusion, we hold that respondent's administrative and
judicial position was substantially justified; i.e., respondent's
position had a reasonable basis in both fact and law.
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Consequently, we will deny petitioners' Motion for Litigation and
Administrative Costs pursuant to section 7430 and Rule 231.
To reflect the foregoing,
An appropriate order
and decision will be entered.