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The full case caption appears at the end of this opinion.

WOLLMAN, Chief Judge.This tax case arises from an assessment of trust fund recovery penalties pursuantto 26 U.S.C. (I.R.C.) � 6672 (1994) against two officers of Iowa Malleable Iron Co.(IMI), Jean E. Bisbee and Maurice Warner Green, Jr. In a consolidated case, a juryfound Bisbee but not Green liable for the penalty. Bisbee made several proceduralchallenges to the validity of the assessment against him, which the district courtrejected. Green moved to recover litigation costs from the government as a prevailingparty pursuant to I.R.C. � 7430, but the court denied his motion because it found thatthe United States was substantially justified in pursuing the action against Green. Weaffirm in part and reverse and remand in part.


IMI failed to account for and pay over employment taxes as required by I.R.C.�� 3402 and 6601 in the second and third quarters of 1993. During the tax periods atissue, Green was treasurer and Bisbee was president and chief executive officer (CEO)of IMI. Green had worked for IMI for 21 years and had previously served as chieffinancial officer, treasurer, president, and CEO. Bisbee took over Green’s formeroffices of president and CEO in 1992. In 1996 and 1997, the Internal Revenue Service(IRS) assessed penalties against both Green and Bisbee under I.R.C. � 6672, afterdetermining that they were persons responsible to “collect, truthfully account for, andpay over” the employment taxes and that each had willfully failed to pay over thosetaxes. I.R.C. � 6672.

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