                     T.C. Summary Opinion 2001-36



                       UNITED STATES TAX COURT



                    WM. DENNIS GRAY, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 13062-99S.                    Filed March 21, 2001.


     Wm. Dennis Gray, pro se.

     Gerald L. Brantley, for respondent.


     PAJAK, Special Trial Judge: This case was heard pursuant to

section 7463.    The decision to be entered is not reviewable by

any other court, and this opinion should not be cited as

authority.    Unless otherwise indicated, all section references

are to the Internal Revenue Code in effect for the year in issue,

and all Rule references are to the Tax Court Rules of Practice

and Procedure.

     This case is before the Court pursuant to petitioner's
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motion for litigation costs under section 7430 and Rules 230

through 233.   Petitioner claimed $65.76 of litigation costs based

upon the following expenses: $60.00 for the filing fee, $.80 for

the money order fee, and $4.96 for postage.

     Neither party requested a hearing on petitioner's motion.

Rule 232(a).   Accordingly, we rule on petitioner's motion on the

basis of the parties' submissions and the record in this case.

The underlying issues raised in the petition were settled by a

stipulation of settlement.    At the time the petition was filed,

petitioner resided in San Antonio, Texas.

     In the notice of deficiency respondent determined a

deficiency in petitioner's 1996 Federal income tax of $3,504, a

section 6651(a)(1) addition to tax of $788.40, a section

6651(a)(2) addition to tax of $315.36, and a section 6654(a)

addition to tax of $188.68.

     Under section 7430, a taxpayer may be awarded a judgment for

reasonable litigation costs if the taxpayer meets certain

criteria and if respondent’s position was not substantially

justified.   Respondent concedes that petitioner substantially

prevailed for purposes of section 7430(c)(4)(A)(i).   However,

respondent maintains that his position was substantially

justified.

     In deciding the merits of a motion for litigation costs, the

Court generally considers the reasonableness of respondent's
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position from the date the answer was filed.       Huffman v.

Commissioner, 978 F.2d 1139, 1148 (9th Cir. 1992), affg. in part,

revg. in part, and remanding T.C. Memo. 1991-144.       No answer was

required in this case which was tried under the small tax case

procedures.     Rule 175(b).    Accordingly, respondent’s position for

the purpose of the motion is the position maintained by

respondent during the pendency of the case, which is essentially

that taken in the notice of deficiency.

     Whether respondent's position was substantially justified

turns on a finding of reasonableness, based upon all the facts

and circumstances, as well as the legal precedents relating to

the case.   Pierce v. Underwood, 487 U.S. 552, 565 (1988); Swanson

v. Commissioner, 106 T.C. 76, 86 (1996).       A position is

substantially justified if the position is "justified to a degree

that could satisfy a reasonable person."       Pierce v. Underwood,

supra at 565.    The Court must "consider the basis for

respondent's legal position and the manner in which the position

was maintained."     Wasie v. Commissioner, 86 T.C. 962, 969 (1986).

The reasonableness of respondent's position and conduct

necessarily requires considering the facts available to

respondent at that time.       Coastal Petroleum Refiners, Inc. v.

Commissioner, 94 T.C. 685, 689 (1990); DeVenney v. Commissioner,

85 T.C. 927, 930 (1985).       The fact that respondent eventually

loses or concedes the case does not establish an unreasonable
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position.     Sokol v. Commissioner, 92 T.C. 760, 767 (1989).

     Petitioner did not file a tax return for his 1996 taxable

year.   Respondent received a Form 1099-B from Dean Witter

Reynolds, Inc. (Dean Witter), which reported that petitioner

realized income in the amount of $27,636 from the sale of

stocks/bonds.    Respondent issued a 30-day letter to petitioner on

September 11, 1998, noting that respondent had not received

petitioner's 1996 return and computing petitioner's income based

on the Form 1099-B received from Dean Witter.    The letter also

asked petitioner to explain why he was not required to file a

return for 1996 or to enclose information he would like the IRS

to consider.    Petitioner failed to respond to the 30-day letter.

     Respondent issued petitioner a notice of deficiency on May

7, 1999.    Petitioner filed his petition on July 28, 1999.     In the

petition, petitioner stated:    "I have never had an account with

DEAN WITTER REYNOLDS INCORPORATED and I did not sell any

STOCKS/BONDS in 1996".

     Respondent sent a letter to Dean Witter on August 25, 1999,

requesting information concerning the 1996 stock/bond sale by

petitioner.    On August 30, 1999, respondent spoke with

petitioner, who stated that he had e-mailed an information

request to Dean Witter on August 27, 1999.    Petitioner further

stated that he had never had an account with Dean Witter, nor had

he made any sales during 1996.    Dean Witter did not respond to
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respondent.   Another request letter was sent to Dean Witter by

certified mail on September 27, 1999.    When Dean Witter again

failed to respond, respondent on October 26, 1999, sent a third

request letter and suggested that a subpeona duces tecum might be

issued.

     On November 15, 1999, a Dean Witter representative called

respondent about a contact at Nations Bank Investment (Nations

Bank), who had the relevant information.    Respondent immediately

left a message with Nations Bank.    Two days later, respondent

faxed Nations Bank the letters previously sent to Dean Witter.

Since respondent did not receive a reply, respondent again called

Nations Bank, and a representative told respondent they were

working to obtain the information.

     Thereafter, a representative of Banc of America called on

behalf of Nations Bank.   Petitioner’s account was with Banc of

America.   Banc of America at that time did not deal directly in

securities, and it employed Dean Witter as its agent.

     On December 6, 1999, respondent finally received a letter

and documentation from Banc of America in response to the

request.   The documentation showed that on January 11, 1996,

petitioner received reportable gross proceeds of $27,636.71 from

the sale of a U.S. Treasury note.    The documentation also

established that petitioner's basis in the note was $25,000, a

fact not known previously to respondent.
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     On December 9, 1999, respondent spoke with petitioner about

the documentation.   Petitioner acknowledged that the transaction

was probably his, but he wanted to review his records.

Respondent faxed all the documents to petitioner.

     On January 3, 2000, respondent spoke to petitioner, who

agreed to the additional income provided his basis was taken into

account for computation of taxable gain.    Respondent asked

petitioner to provide records to substantiate his basis in the

note.   Petitioner sent substantiation of the basis to respondent.

Among other things, petitioner's records indicated that the

account was with Dean Witter.   Apparently, the revised capital

gain income, taking into account petitioner’s basis, did not

result in a deficiency after subtracting the standard deduction

and the exemption amount.   At the call of this case from the

trial calendar on January 31, 2000, respondent reported as a

basis of settlement that petitioner did not have a deficiency in

income tax for 1996 and was not liable for any additions to tax.

The Court entered a decision accordingly.

     Respondent contends that respondent's position was

substantially justified and states that if petitioner had been

forthcoming with the documentation in response to the 30-day

letter, then this proceeding in this Court would have been

unnecessary.   We agree with respondent.

     Whenever there is a factual determination, respondent is not
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obliged to concede a case until respondent receives the necessary

documentation which proves the taxpayer's contentions.       Brice v.

Commissioner, T.C. Memo. 1990-355, affd. without published

opinion 940 F.2d 667 (9th Cir. 1991); Currie v. Commissioner,

T.C. Memo. 1989-23.    Moreover, after respondent receives

documentation, respondent is allowed a reasonable period of time

in which to analyze the documentation and modify its position

accordingly.    Sokol v. Commissioner, supra at 765-766.

     In this case, respondent had received information that

petitioner received income from a third party payor.      Petitioner

did not respond to respondent's repeated requests for information

about the reported income.    Respondent made multiple attempts to

obtain the relevant documentation.      When respondent finally

received the documentation, respondent analyzed it and conceded

the case.    Based on this record, we find that petitioner failed

to show that respondent's position was not substantially

justified.   In fact, respondent was substantially justified.

Consequently, petitioner's motion will be denied.

     Reviewed and adopted as the report of the Small Tax Case

Division.

                                            An appropriate order and

                                     decision will be entered.
