T.C. Memo. 1998-400
UNITED STATES TAX COURT
WAYNE C. MASON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3671-97. Filed November 12, 1998.
Wayne C. Mason, pro se.
John A. Freeman, for respondent.
MEMORANDUM OPINION
ARMEN, Special Trial Judge: This matter is before the Court
on petitioner's motion for an award of litigation costs under
section 7430 and Rules 230 through 233.1
1
Unless otherwise indicated, all section references are
to the Internal Revenue Code in effect for 1993, the taxable year
(continued...)
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After concessions by respondent,2 the issues for decision
are as follows:
(1) Whether petitioner unreasonably protracted the court
proceeding. We hold that he did not.
(2) Whether the litigation costs claimed by petitioner are
reasonable. We hold that a portion of the litigation costs
claimed by petitioner are not reasonable.
Neither party requested an evidentiary hearing, and the
Court concludes that such a hearing is not necessary for the
proper disposition of petitioner's motion. Rule 232(a)(2). We
therefore decide the matter before us based on the record that
has been developed to date.
Background
Petitioner resided in Barnesville, Ohio, at the time that
his petition was filed with the Court.
By notice of deficiency dated December 11, 1996, respondent
determined a deficiency in petitioner's Federal income tax for
1
(...continued)
in issue. However, all references to sec. 7430 are to such
section in effect at the time that the petition was filed. All
Rule references are to the Tax Court Rules of Practice and
Procedure.
2
Respondent concedes: (1) Petitioner exhausted his
administrative remedies, see sec. 7430(b)(1); (2) petitioner
substantially prevailed, see sec. 7430(c)(4)(A)(i); (3)
respondent's position at the time the notice of deficiency was
issued and at the time respondent's answer was filed was not
substantially justified, see sec. 7430(c)(4)(B); and (4)
petitioner satisfies the applicable net worth requirement, see
sec. 7430(c)(4)(A)(ii).
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the taxable year 1993 in the amount of $4,778, as well as
additions to tax under sections 6651(a) and 6654(a) in the
amounts of $1,194.50 and $200.17, respectively.
By petition filed February 20, 1997, petitioner commenced
his case in this Court. Petitioner was not aided by counsel in
preparing or filing his petition. Pursuant to the Court's order
for amended petition and filing fee, petitioner filed an amended
petition on March 17, 1997, through his attorney, Robert Giffin.
In this regard, attorney Giffin charged petitioner 3.4 hours of
service for "Redrafting and proof of Tax Court Amended petition;
entry of appearance; and Request for Place of Trial" and .5 hours
for meeting with petitioner, at $125 per hour. Subsequently, by
motion filed May 1, 1997, and granted May 29, 1997, petitioner
withdrew attorney Giffin as counsel.
By letter dated May 1, 1997, respondent's Appeals officer
requested information in support of petitioner's allegations
contained in the amended petition. On May 13, 1997, respondent
filed an answer to petitioner's amended petition, denying various
allegations made by petitioner for lack of sufficient knowledge.
Petitioner's subsequent counsel, James B. Curtin, provided the
requested information to the Appeals officer by letter dated July
15, 1997. In this regard, attorney Curtin charged petitioner
$200 for his services.
On August 14, 1997, respondent conceded the determinations
in the notice of deficiency and sent a proposed settlement
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document to petitioner's then former counsel, attorney Giffin.
Having received no reply, respondent mailed petitioner a proposed
settlement document reflecting respondent's concession of the
deficiency notice determinations on three subsequent occasions,
March 16, April 10, and May 4, 1998. Respondent requested that
petitioner sign and return the proposed settlement document so
that the parties could avoid an appearance on the designated
trial date, May 18, 1998. Petitioner declined to sign the
proposed settlement document because no agreement could be
reached regarding the recovery of litigation costs.
At the calendar call on May 18, 1998, respondent orally
conceded the determinations in the notice of deficiency.
Pursuant to the Court's Order, a stipulation of settled issues
was filed on July 6, 1998. Petitioner filed his motion for
litigation costs on June 30, 1998, seeking recovery for the
following costs:
Postage costs1 $13.58
Filing fee 60.00
2
Fees paid to attorney Giffin 487.50
Fees paid to attorney Curtin 200.00
Mileage - 3,792 miles
1
To the extent any litigation costs are to be awarded in this case,
respondent does not contest the postage costs.
2
Actually, petitioner claims $547.50 in fees paid to attorney Giffin.
However, the $547.50 amount includes $60 in filing fee. For accuracy, we have
properly reflected the figures as $487.50 for attorney's fees and $60 for
filing fee.
With the exception of 245 miles and $8.54 in postage costs,
all of the foregoing costs were incurred on or before March 16,
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1998, the date on which respondent first mailed petitioner a
proposed settlement document.3 All of the costs associated with
attorney Giffin's services were incurred in 1997. Apparently,
attorney Curtin provided a portion of his services in 1997 and
another portion in 1998.
Discussion
We apply section 7430 as amended by the Taxpayer Bill of
Rights 2 (TBOR 2), Pub. L. 104-168, secs. 701-704, 110 Stat.
1452, 1463-1464 (1996). The amendments made by TBOR 2 apply in
the case of proceedings commenced after July 30, 1996. TBOR 2
secs. 701(d), 702(b), 703(b), and 704(b), 110 Stat. 1463-1464.
Inasmuch as the petition herein was filed on February 20, 1997,
the amendments made by TBOR 2 apply in the present case.4
A. Requirements for a Judgment Under Section 7430
3
In this regard, we ignore the proposed settlement
document mailed to petitioner's former attorney because attorney
Giffin had already been withdrawn and there is no indication that
the proposed settlement document mailed to attorney Giffin was
received by petitioner.
4
Congress has amended sec. 7430 twice since Taxpayer Bill
of Rights 2, Pub. L. 104-168, 110 Stat. 1452 (1996). First,
Congress amended sec. 7430 in the Taxpayer Relief Act of 1997
(TRA), Pub. L. 105-34, secs. 1285, 1453, 111 Stat. 788, 1038-
1039, 1055. Second, Congress amended sec. 7430 in the IRS
Restructuring and Reform Act of 1998 (RRA), Pub. L. 105-206, sec.
3101, 112 Stat. 685, 727-730. However, the amendments made by
TRA do not apply in the case of proceedings commenced before Aug.
5, 1997, and the amendments made by RRA apply only to costs
incurred more than 180 days after July 22, 1998. Inasmuch as the
petition herein was filed on Feb. 10, 1997, and all of the
claimed costs were incurred no later than May 18, 1998 (the trial
date), the amendments made by TRA and RRA do not apply in the
present case.
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Under section 7430(a), a judgment for litigation costs
incurred in connection with a court proceeding may only be
awarded if a taxpayer: (1) Is the "prevailing party"; (2) has
exhausted his or her administrative remedies within the Internal
Revenue Service (IRS); and (3) did not unreasonably protract the
court proceeding. Sec. 7430(a) and (b)(1), (3). A taxpayer must
satisfy each of these three requirements in order to be entitled
to a judgment under section 7430. Rule 232(e). Upon
satisfaction of these requirements a taxpayer may be entitled to
"reasonable litigation costs". Sec. 7430(a)(2), (c)(1).
Respondent concedes that petitioner was the prevailing party
in the court proceeding. Respondent also concedes that
petitioner exhausted his administrative remedies within the IRS.
Respondent contends, however, that petitioner unreasonably
protracted the court proceeding and that the litigation costs
claimed are unreasonable.
B. Unreasonable Protraction of the Court Proceeding
Pursuant to section 7430(b)(3), "No award for reasonable
litigation * * * costs may be made * * * with respect to any
portion of the * * * court proceeding during which the prevailing
party has unreasonably protracted such proceeding."
Respondent mailed petitioner a proposed settlement document
on three separate occasions--the earliest on March 16, 1998.
Respondent contends that petitioner unreasonably protracted the
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court proceeding by failing to sign and return the proposed
settlement document mailed to him on March 16, 1998. If
petitioner unreasonably protracted the court proceeding, then
petitioner may not be entitled to any recovery for litigation
costs incurred after receipt of the proposed settlement document.
With respect to costs incurred after March 16, 1998, petitioner
claims recovery only for mileage (245 miles) and a postage
expense of $8.54.
We have previously held that a taxpayer's refusal to sign a
stipulated decision does not constitute unreasonable protraction
of the proceeding when the taxpayer's refusal is based upon the
parties' failure to reach an agreement regarding litigation
costs. Buck v. Commissioner, T.C. Memo. 1993-16. In Buck, the
Commissioner sent the taxpayer a proposed stipulated decision
about 3 weeks before the scheduled trial date. The taxpayer's
attorney met with the Commissioner's attorney, but no agreement
was reached regarding the taxpayer's litigation costs. Under
those circumstances, we held that the taxpayer did not
unreasonably protract the proceeding by refusing to sign the
stipulated decision and appearing at the calendar call to request
an award of litigation costs.
Similarly, in the instant case, petitioner's failure to sign
the proposed settlement document was based on the fact that no
agreement regarding litigation costs could be reached between the
parties. At the earliest, respondent mailed petitioner a
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proposed settlement document about 2 months prior to the
scheduled trial date. Petitioner declined to sign the proposed
settlement document because no agreement had been reached
regarding litigation costs. Rather, petitioner appeared at trial
to request an award of litigation costs. Under these
circumstances, we hold that petitioner did not unreasonably
protract the court proceeding.
C. Reasonableness of Litigation Costs
In the case of a prevailing party, section 7430(a)(2)
provides for the recovery of "reasonable litigation costs".
Section 7430(c)(1) defines reasonable litigation costs to include
reasonable court costs and reasonable expenses of expert
witnesses, studies, and attorney's fees.
1. Attorney's Fees
Generally, reasonable attorney's fees are limited to $110
per hour. Sec. 7430(c)(1)(B)(iii). However, an adjustment may
be made for an increase in the cost of living or the existence of
a special factor, such as the limited availability of qualified
attorneys. Sec. 7430(c)(1).
Petitioner claims attorney's fees for the services of two
different attorneys. Petitioner's first counsel, attorney
Giffin, assisted petitioner by meeting with petitioner and
drafting the amended petition. In this regard, petitioner claims
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recovery for 3.9 hours at $125 per hour for attorney Giffin's
services. We do not think that 3.9 hours is an unreasonable
amount of time for attorney Giffin's services. However,
petitioner may not recover at a rate in excess of $110 per hour
for attorney Giffin's services. There is no persuasive evidence
that the availability of qualified attorneys to aid petitioner in
redrafting the petition was limited. See sec. 7430(c)(1).
Further, after application of the 1997 cost-of-living adjustment,
the statutory rate is nevertheless limited to $110 per hour. See
sec. 7430(c)(1); Rev. Proc. 96-59, 1996-2 C.B. 392, 396.
Accordingly, petitioner's recovery for attorney Giffin's services
will be limited to 3.9 hours at $110 per hour, or $429.
Petitioner also claims recovery for $200 in attorney's fees
incurred with respect to attorney Curtin's services. Attorney
Curtin assisted petitioner in providing the Appeals officer with
the requested documentation that resulted in respondent's
concession of the issues raised in the notice of deficiency.
Petitioner claims $200 in attorney's fees for attorney Curtin's
services. We think that petitioner's claim of $200 in this
regard meets the applicable standard and is reasonable.5
2. Mileage
Petitioner claims recovery for mileage with regard to 3,792
miles of travel allegedly incurred in connection with this case.
5
A $200 expense for attorney Curtin's services translates
into 1.8 hours of service at a rate of $110 per hour.
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Section 7430 defines reasonable costs to include court costs,
cost of studies, expert fees, and attorney's fees. Mileage
incurred by a taxpayer is not within the definition of reasonable
costs and is therefore not recoverable under section 7430. See
Buck v. Commissioner, T.C. Memo. 1993-16. Accordingly,
petitioner may not recover costs for mileage.6
3. Filing Fee and Postage Costs
Reasonable litigation costs include reasonable court costs.
Sec. 7430(c)(1)(A). Petitioner is therefore entitled to recover
the $60 Tax Court filing fee.
Finally, and as previously noted, respondent concedes the
postage costs if petitioner is entitled to an award of litigation
costs. Because petitioner is entitled to recover reasonable
litigation costs, he may recover the postage costs.
To reflect our disposition of the disputed issues and
respondent's concessions,
An appropriate order and
decision will be entered.
6
Regardless, we note that the majority of the mileage
claimed by petitioner is not reasonable.