Opinion ID: 601582
Heading Depth: 3
Heading Rank: 1

Heading: Taxpayer as the Prevailing Party

Text: 23 A prevailing party is one who establishes that the position of the United States in a civil proceeding was not substantially justified and who has substantially prevailed in the controversy. 26 U.S.C. § 7430(c)(4)(A); Pate, 982 F.2d at 459. The government alleges that its position was substantially justified because the document did not specifically waive the payment of interest. 24 The Supreme Court has defined substantially justified as having a reasonable basis both in law and in fact or sufficient to satisfy a reasonable person. Pierce v. Underwood, 487 U.S. 552, 563-65, 108 S.Ct. 2541, 2549-50, 101 L.Ed.2d 490 (1988). In making this determination, the court must look at all the facts and circumstances as well as relevant legal precedent, with the burden of proof on the taxpayer. Pate, 982 F.2d at 459. The government's failure to prevail in the underlying litigation does not make its position necessarily unreasonable, but it remains a factor for our consideration. Heasley v. Commissioner, 967 F.2d 116, 120 (5th Cir.1992). 25 Taxpayers argue that the government's position was unreasonable because the depositions of its employees should have put it on notice that the parties intended a full and final settlement, including interest. We agree. The facts indicate that the taxpayers repeatedly asked for and received assurances from the government that the settlement document would cover their entire civil liability. We find no abuse of discretion in the conclusion that the government's pursuit of litigation in spite of these facts was unreasonable.