T.C. Memo. 2001-41
UNITED STATES TAX COURT
PHUONG K. NGUYEN, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 16146-99. Filed February 23, 2001.
Bruce E. Gardner, for petitioner.
Warren P. Simonsen and Roger W. Bracken, for respondent.
MEMORANDUM OPINION
ARMEN, Special Trial Judge: This matter is before the
Court on petitioner’s motion for an award of administrative and
litigation costs, filed pursuant to section 7430 and Rules 230
through 233.1
1
All section references are to the Internal Revenue Code,
as amended; however, references to sec. 7430 are to such section
(continued...)
- 2 -
After concessions by respondent,2 the issues for decision
are as follows:
(1) Whether respondent's position in the administrative and
court proceedings was substantially justified. We hold that it
was in the court proceeding but that it was not in the
administrative proceeding.
(2) Whether petitioner unreasonably protracted the
administrative and court proceedings. We hold that she did to
the extent provided herein.
(3) Whether the administrative and litigation costs claimed
by petitioner are reasonable. We hold that costs claimed by
petitioner are reasonable to the extent provided herein.
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. See Rule 232(a)(2).
We therefore decide the matter before us based on the record that
has been developed to date.
1
(...continued)
in effect at the time that the petition was filed. Unless
otherwise indicated, all Rule references are to the Tax Court
Rules of Practice and Procedure.
2
Respondent concedes: (1) Petitioner substantially
prevailed, see sec. 7430(c)(4)(A)(i); (2) petitioner satisfied
the applicable net worth requirement, see sec. 7430(c)(4)(A)(ii);
and (3) petitioner exhausted her administrative remedies, see
sec. 7430(b)(1).
- 3 -
Background
Petitioner resided in Silver Spring, Maryland, at the time
that her petition was filed with the Court.
Petitioner timely filed a Federal income tax return for the
taxable year 1998. On her return, petitioner listed her filing
status as head of household, and she claimed dependency
exemptions and the earned income credit. Petitioner also claimed
a refund of tax in the amount of $2,725.
By letter dated May 7, 1999 (the examination letter),
respondent’s Service Center in Atlanta, Georgia, informed
petitioner that “We are examining your Federal income tax return
for 1998 and find we need documentation to verify certain items.”
More specifically, respondent requested that petitioner provide
information and documents relating to: (1) Head of household
filing status; (2) dependency exemptions; and (3) the earned
income credit.
Petitioner responded to the examination letter by mailing
various documents to respondent. After reviewing this material,
respondent concluded that the information submitted was
insufficient to verify the items under examination.
Thereafter, by letter dated June 10, 1999 (the proposed
adjustment letter), respondent proposed a deficiency in
petitioner’s income tax in the amount of $2,225. The proposed
deficiency, which served to reduce the claimed overpayment from
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$2,725 to $500, was predicated on (1) a change in petitioner’s
filing status from head of household to single and (2) the
disallowance of the dependency exemptions and earned income
credit as claimed on the return. Respondent informed petitioner
that if she did not agree with the proposed deficiency, she could
submit documents or information that she wished respondent to
consider.
In response to the proposed adjustment letter, petitioner
mailed various documents to respondent. Respondent reviewed this
material and concluded that it was insufficient to verify the
items under examination. By letter dated July 1, 1999 (the July
1st letter), respondent so informed petitioner. Respondent also
informed petitioner in the July 1st letter that any further
supporting documents or information that petitioner might care to
submit would be considered if such material were received within
15 days of the date of the letter.
Petitioner responded to the July 1st letter by mailing
various supporting documents to respondent. This material was
received by the mailroom in respondent’s Atlanta Service Center
on July 12, 1999. The material was routed to the examination
division, where it was received on July 13, 1999, and then routed
to the 90-day unit, where it was received on July 15, 1999.3
3
We understand the 90-day unit to be the office in the
examination division of the Service Center that is responsible
(continued...)
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By a notice of deficiency dated July 16, 1999 (the notice of
deficiency), respondent determined a deficiency in petitioner’s
Federal income tax for 1998 in the amount of $2,225. The
determinations made by respondent in the notice of deficiency
mirror those made in the proposed adjustment letter; namely, the
change in petitioner’s filing status from head of household to
single and the disallowance of the dependency exemptions and the
earned income credit as claimed on the return. The notice of
deficiency was issued by the director of respondent’s Atlanta
Service Center.
After the issuance of the notice of deficiency, respondent
reviewed the documentation that petitioner had submitted in
response to respondent’s July 1st letter. Upon reviewing this
material, respondent concluded that petitioner was entitled to
head of household filing status, as well as the dependency
exemptions and earned income credit as originally claimed on her
return. Accordingly, by letter dated August 18, 1999 (the no-
change letter), respondent informed petitioner that respondent
had reconsidered her 1998 tax liability and had accepted her 1998
return as filed. The no-change letter informed petitioner as
follows:
3
(...continued)
for issuing notices of deficiency to taxpayers.
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After reviewing the information we received on
7/12/1999, we reconsidered your 1998 federal income tax
liability and accepted your 1998 return as filed or as
adjusted previously.
Please disregard the notice of deficiency we sent
you on 7/16/1999. You will not need to file a petition
with the United States Tax Court.
If you have any questions, you may write or call
the tax examiner whose name, telephone number, and
contact hours appear at the top right corner of this
letter.
The no-change letter was issued by the chief of one of the
customer service divisions in respondent’s Atlanta Service
Center.
Notwithstanding the no-change letter, petitioner retained
Bruce E. Gardner (Mr. Gardner) to represent her. Mr. Gardner is
an attorney who is admitted to practice before this Court, and he
is petitioner’s counsel of record in the present proceeding.
Petitioner met with Mr. Gardner on August 28, 1999.
Consistent with the no-change letter, respondent mailed a
check to petitioner on September 13, 1999. The amount of the
check, $2,808.67, represented the refund claimed by petitioner on
her 1998 return, i.e., $2,725, plus $83.67 of interest.
On October 14, 1999, Mr. Gardner hand delivered a petition
to the Court, thereby commencing a case on petitioner’s behalf.
See sec. 6213(a).
On December 13, 1999, respondent filed a motion to extend by
60 days the time within which to file an answer to the petition.
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The motion was predicated on the ground that respondent’s
district counsel office had not yet received the administrative
file pertaining to petitioner’s 1998 return (the administrative
file). On December 16, 1999, petitioner filed an Opposition to
respondent’s motion, objecting to a 60-day extension but agreeing
to a 30-day extension. By Order dated December 20, 1999,
respondent’s motion was granted in that the time to file an
answer was extended to January 19, 2000.
In the meantime, on December 17, 1999, respondent’s district
counsel office in Washington, D.C. (district counsel), wrote the
following letter to Mr. Gardner:
As you are aware, the government filed a motion to
extend time to answer the Nguyen case. As explained in
my voice mail to you, I have yet to receive the
administrative file in this case. A preliminary review
of Ms. Nguyen’s account indicates that the Service
accepted her 1998 return sometime in August 1999, and
sent her a refund on September 13, 1999. It is unclear
as to whether or not she was sent a letter advising her
that her return was accepted. I would appreciate your
notifying me if she received such a letter.
If I find that Ms. Nguyen’s 1998 return has
already been accepted by the Service, I will recommend
that an answer not be filed in this case, but rather a
decision document reflecting no deficiency due from Ms.
Nguyen and no overpayment due to her for tax year 1998.
If you have a question, please call me at * * * .
The record suggests that Mr. Gardner did not notify district
counsel that petitioner had received the no-change letter.
On January 14, 2000, district counsel received the
administrative file, confirmed the issuance of the no-change
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letter, and informed Mr. Gardner that respondent wished to submit
a decision document to the Court reflecting a zero deficiency, in
lieu of filing an answer. Mr. Gardner responded by stating that
he intended to file a motion for administrative and litigation
costs.
On January 19, 2000, respondent filed an answer to the
petition. In the answer, respondent conceded that there was no
deficiency in income tax due from petitioner for the taxable year
1998. Respondent attached a copy of the no-change letter as an
exhibit to the answer.
Also on January 19, 2000, district counsel sent Mr. Gardner
a letter enclosing a form of decision and stipulation (the form
of decision) reflecting no deficiency in, and no overpayment of,
petitioner’s income tax for 1998. The form of decision included
a stipulation that petitioner is not entitled to attorney’s fees
under section 7430. That same day, district counsel received a
letter from Mr. Gardner stating, in part, as follows:
This letter concerns your message that you are in the
process of preparing decision documents reflecting no
tax deficiency is due.
We are delighted that this case can be expeditiously
resolved on the merits. Based upon you message it
appears that the notice of deficiency should have never
been mailed to the taxpayer. Or if the Service
subsequently changed its position on this case, it did
not legally withdraw the notice of deficiency by
executing the proper forms. In either case, the
taxpayer incurred unnecessary legal expenses and costs
related to the defense of the deficiency notice in the
amount of $1,022.50 for which she should be compensated.
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A fair and equitable resolution of this case should put
the taxpayer in the position she would have been if the
deficiency notice had not been mailed. Accordingly, we
submit costs and attorney fees in the amount $1,022.50
should be paid by the Service to make the taxpayer
whole and that amount should be reflected in the
decision documents you are in the process of repairing.
On March 13, 2000, district counsel received from Mr.
Gardner executed copies of the form of decision, which had been
revised to eliminate the stipulation regarding attorney’s fees.
Respondent in turn executed the form of decision, as revised, and
submitted it to the Court. On March 30, 2000, the Court executed
the document and entered decision (the Decision) pursuant to the
parties’ apparent agreement.
On April 27, 2000, petitioner filed a Motion For An Award Of
Reasonable Administrative & Litigation Costs (petitioner’s motion
for costs), requesting an award in the amount of $2,039.25. The
Court then vacated the Decision and filed it instead as a
stipulation of settlement between the parties. See Rules 231(c)
and 232(f).
On June 19, 2000, respondent filed a Response to
petitioner’s motion for costs (respondent’s Response). In the
Response, respondent alleges that his position in the proceedings
was reasonable and disputes petitioner’s allegations that (1)
petitioner did not unreasonably protract the proceedings and (2)
the amount of costs requested was reasonable.
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On June 23, 2000, petitioner filed an Additional Affidavit
pursuant to Rule 232(d). In the Additional Affidavit, petitioner
requests an award of costs in the amount of $3,312.19.
On July 24, 2000, petitioner filed a Motion In Limine.
Relying principally on Fed. R. Evid. 408 (relating to compromise
and offers to compromise), petitioner’s motion sought to exclude
from evidence various statements made in, and various exhibits
attached to, respondent’s Response.4 On August 14, 2000,
respondent filed a Response objecting to petitioner’s Motion in
Limine. On August 18, 2000, the Court denied petitioner’s
motion.
On August 31, 2000, petitioner filed a Reply to respondent’s
Response pursuant to an Order of the Court. In her reply,
petitioner requests an award of costs in the amount of $6,724.69.
Thereafter, on September 25, 2000, respondent filed a Reply to
petitioner’s Reply filed August 31, 2000.
On January 19, 2001, the Court initiated a telephone
conference with the parties for the purpose of encouraging a
settlement regarding the award of costs. On January 26, 2001,
4
For example, petitioner sought to exclude the fact that
on Sept. 13, 1999, respondent mailed to petitioner a check for
$2,808.67, which amount constituted the overpayment claimed by
petitioner on her 1998 return, plus interest. Suffice it to say
that petitioner’s Motion in Limine sought to emasculate the
factual and legal basis for respondent’s defense against
petitioner’s motion for an award of costs and, if granted, would
have precluded the Court from rationally deciding petitioner’s
motion for costs.
- 11 -
the parties advised the Court that their negotiations in this
regard had not been successful.
Discussion
We apply section 7430 as most recently amended by Congress
in the Internal Revenue Service Restructuring and Reform Act of
1998 (RRA 1998), Pub. L. 105-206, sec. 1301, 112 Stat. 685, 727.
However, certain of the amendments made by RRA 1998 to section
7430 (regarding the reasonableness of costs, the type of
recoverable costs, and other provisions that are not in issue
herein) apply only to costs incurred after January 18, 1999.
A. Requirements For a Judgment Under Section 7430
Under section 7430(a), a judgment for litigation costs
incurred in connection with a court proceeding may be awarded
only if a taxpayer: (1) Is the prevailing party, (2) has
exhausted his or her administrative remedies within the IRS, and
(3) did not unreasonably protract the court proceeding. See sec.
7430(a) and (b)(1), (3). Similarly, a judgment for
administrative costs incurred in connection with an
administrative proceeding may be awarded under section 7430(a)
only if a taxpayer: (1) Is the prevailing party, and (2) did not
unreasonably protract the administrative proceeding. See sec.
7430(a) and (b)(3).
A taxpayer must satisfy each of the respective requirements
in order to be entitled to an award of litigation or
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administrative costs under section 7430. See Rule 232(e). Upon
satisfaction of these requirements, a taxpayer may be entitled to
reasonable costs incurred in connection with the administrative
or court proceeding. See sec. 7430(a)(1) and (2), (c)(1) and
(2).
To be a “prevailing party”, the taxpayer must substantially
prevail with respect to either the amount in controversy or the
most significant issue or set of issues presented and satisfy the
applicable net worth requirement. Sec. 7430(c)(4)(A).
Respondent concedes that petitioner has satisfied the
requirements of section 7430(c)(4)(A). Petitioner will
nevertheless fail to qualify as the prevailing party if
respondent can establish that respondent’s position in the court
and administrative proceedings was substantially justified. See
sec. 7430(c)(4)(B).
B. Substantial Justification
The Commissioner's position is substantially justified if,
based on all of the facts and circumstances and the legal
precedents relating to the case, the Commissioner acted
reasonably. See Pierce v. Underwood, 487 U.S. 552 (1988); Sher
v. Commissioner, 89 T.C. 79, 84 (1987), affd. 861 F.2d 131 (5th
Cir. 1988). In other words, to be substantially justified, the
Commissioner's position must have a reasonable basis in both law
and fact. See Pierce v. Underwood, supra; Rickel v.
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Commissioner, 900 F.2d 655, 665 (3d Cir. 1990), affg. in part and
revg. in part on other grounds 92 T.C. 510 (1989). 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 (construing similar language in the Equal Access to
Justice Act). Thus, the Commissioner's position may be incorrect
but nevertheless be substantially justified "'if a reasonable
person could think it correct'". Maggie Management Co. v.
Commissioner, 108 T.C. 430, 443 (1997) (quoting Pierce v.
Underwood, supra at 566 n.2).
The relevant inquiry is "whether * * * [the Commissioner]
knew or should have known that * * * [his] position was invalid
at onset". Nalle v. Commissioner, 55 F.3d 189, 191 (5th Cir.
1995), affg. T.C. Memo. 1994-182. We look to whether the
Commissioner's position was reasonable given the available facts
and circumstances at the time that the Commissioner took his
position. See Maggie Management Co. v. Commissioner, supra at
443; DeVenney v. Commissioner, 85 T.C. 927, 930 (1985).
The fact that the Commissioner eventually concedes, or even
loses, a case does not establish that his position was
unreasonable. See Estate of Perry v. Commissioner, 931 F.2d
1044, 1046 (5th Cir. 1991); Sokol v. Commissioner, 92 T.C. 760,
767 (1989). However, the Commissioner's concession does remain a
factor to be considered. See Powers v. Commissioner, 100 T.C.
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457, 471 (1993), affd. in part, revd. in part and remanded on
another issue 43 F.3d 172 (5th Cir. 1995).
As relevant herein, the position of the United States that
must be examined against the substantial justification standard
with respect to the recovery of administrative costs is the
position taken by the Commissioner as of the date of the notice
of deficiency. See sec. 7430(c)(7)(B). The position of the
United States that must be examined against the substantial
justification standard with respect to the recovery of litigation
costs is the position taken by the Commissioner in the answer to
the petition. See Bertolino v. Commissioner, 930 F.2d 759, 761
(9th Cir. 1991), affg. an unpublished decision of this Court;
Sher v. Commissioner, supra at 134-135. Ordinarily, we consider
the reasonableness of each of these positions separately. See
Huffman v. Commissioner, 978 F.2d 1139, 1144-1147 (9th Cir.
1992), affg. in part, revg. in part and remanding on other issues
T.C. Memo. 1991-144. We necessarily follow this approach here
because respondent’s positions were different in the
administrative and litigation proceedings.
We begin with the position taken by respondent in the
notice of deficiency.
Respondent contends that the notice of deficiency was issued
“because petitioner failed to provide sufficient documentary
substantiation of her entitlement to the disallowed dependency
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exemptions, earned income credit and head of household filing
status, in sufficient time for such documentation to be reviewed
by respondent prior to issuance of the notice of deficiency.”
However, the record belies this contention.
In the July 1st letter, respondent informed petitioner that
the documentation submitted by petitioner in response to the
proposed adjustment letter was insufficient to verify the items
under examination, but that respondent would consider any further
documentation that petitioner might care to submit if such
documentation were received by July 16, 1999. Petitioner
promptly responded to this invitation by mailing documentation,
which was received by the mailroom in respondent’s Atlanta
Service Center on July 12, 1999, the examination division on July
13, 1999, and the 90-day unit on July 15, 1999. Nevertheless,
without first evaluating petitioner’s documentation, respondent
mailed the notice of deficiency to petitioner on July 16, 1999.
After evaluating petitioner’s documentation, however, respondent
concluded that such documentation was sufficient to verify the
items under examination.
The documentation submitted by petitioner in response to the
July 1st letter was solicited by respondent. Having solicited
that documentation, respondent was obliged to evaluate it before
issuing a notice of deficiency.5 Respondent, however, did not do
5
We might take a contrary view if expiration of the period
(continued...)
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so. Such failure led respondent to take a position in the notice
of deficiency that was not supported by information already in
respondent’s possession. In other words, respondent’s position
in the notice of deficiency was contrary to fact and law and
therefore not substantially justified within the meaning of
section 7430(c)(4)(B). See Pierce v. Underwood, 287 U.S. 552
(1988).
Respondent relies on Harrison v. Commissioner, 854 F.2d 263
(7th Cir. 1988), affg. T.C. Memo. 1987-52, for the proposition
that the Commissioner should not be liable for a taxpayer’s costs
for the period of time that it may reasonably take to review
documentation submitted by the taxpayer. However, that case is
clearly distinguishable. There, the Commissioner issued a notice
of deficiency before the examination was completed in order to
toll the running of the period of limitations. Because the
Commissioner had not received the taxpayers’ consent to extend
the period of limitations, the Court of Appeals concluded that
the issuance of the notice was reasonable, notwithstanding the
fact that the Commissioner ultimately conceded the case.
In the present case, the statute of limitations was of no
legitimate concern to respondent at the time that the notice of
5
(...continued)
of limitations were imminent. However, in the present case, the
year under examination was 1998; accordingly, the statute of
limitations on assessment was of no legitimate concern to
respondent in July 1999. See sec. 6501(a).
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deficiency was issued. See supra note 5. Accordingly, Harrison
v. Commissioner, supra, offers no solace to respondent.
We recognize, of course, that it is reasonable for the
Commissioner to refuse to concede an audit adjustment until after
he receives from the taxpayer, and has had an opportunity to
verify, adequate substantiation for such adjustment. E.g.,
O’Bryon v. Commissioner, T.C. Memo. 2000-379. However, we have
not so held in the context of a case in which expiration of the
period of limitations is not imminent and the Commissioner, while
in possession of all relevant facts and documents, neglects to
review such facts and documents and instead issues a notice of
deficiency to the taxpayer.
In view of the foregoing, we hold that the position taken by
respondent in the notice of deficiency was unreasonable.
We turn now to the position taken by respondent in the
answer to the petition. The latter position reflected
respondent’s concession, as evidenced by the no-change letter and
followup refund, of the deficiency, and such position was
substantially justified.
C. Unreasonable Protraction of the Proceedings
Pursuant to section 7430(b)(3), “No award for reasonable
litigation and administrative costs may be made * * * with
respect to any portion of the administrative or court proceeding
during which the prevailing party has unreasonably protracted
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such proceeding.”
After issuing the notice of deficiency, respondent sent
petitioner the no-change letter, informing her that her return
had been accepted as filed and that she could disregard the
notice of deficiency. However, petitioner did not disregard the
notice of deficiency, but rather retained Mr. Gardner, who
subsequently filed a petition on her behalf.
Respondent contends that petitioner unreasonably protracted
the proceedings by pursuing this case after respondent had
conceded it; i.e., after respondent had mailed petitioner the no-
change letter and issued the refund check.
Section 6213(c) provides as follows: “If the taxpayer does
not file a petition with the Tax Court within the time prescribed
in subsection (a) [of section 6213], the deficiency, notice of
which has been mailed to the taxpayer, shall be assessed, and
shall be paid upon notice and demand from the Secretary.”
(Emphasis added.) See also sec. 301.6213-1(c), Proced. & Admin.
Regs., which similarly provides that if the taxpayer fails to
file a timely petition, the district director or the director of
the regional Service Center shall assess the amount determined as
the deficiency.6
6
The notice of deficiency that was sent to petitioner
included the following paragraph, which essentially paraphrased
sec. 6213(c):
If you decide not to file a petition with the Tax
(continued...)
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There is no statutory basis for a no-change letter, cf. sec.
7121 (authorizing closing agreements that are generally final and
conclusive), and we are aware of no case holding that a no-change
letter is binding on the Commissioner. Under the circumstances,
we think it was appropriate for petitioner to protect herself
from the possibility that the no-change letter might not have
represented respondent’s final position, e.g., that the no-change
letter might have been issued before internal review was
completed.7 The commencement of an action in this Court offered
such protection.
Respondent contends that petitioner had a duty to mitigate
costs and that she should have requested that the notice of
deficiency be rescinded. See sec. 6212(d); Hanashiro v.
Commissioner, T.C. Memo. 1999-78; Powell v. Commissioner, T.C.
Memo. 1998-108; see also Hesse v. Commissioner, T.C. Memo. 1997-
6
(...continued)
Court, we would appreciate it if you would sign and
return the enclosed waiver form. This will permit us
to assess the deficiency quickly and will limit the
accumulation of interest. The enclosed envelope is for
your convenience. If you decide not to sign and return
the statement and you do not timely petition the Tax
Court, the law requires us to assess and bill you for
the deficiency after 90 days from the above mailing
date of this letter (150 if this letter is addressed to
you outside the United States). [Emphasis added.]
7
We note that the notice of deficiency was issued by the
director of respondent’s Atlanta Service Center, whereas the no-
change letter was issued by one of the director’s subordinates.
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333; Slattery v. Commissioner, T.C. Memo. 1995-274.8
The no-change letter stated, in effect, that the notice of
deficiency was inaccurate and could be disregarded and that the
filing a petition with the Tax Court was unnecessary. But the
no-change letter did not mention the possibility of rescinding
the notice as permitted by section 6212(d). The case law cited
in the previous paragraph, specifically including Powell v.
Commissioner, supra, generally requires that a rescission be
committed to a writing reflecting the parties’ mutual consent.
Accordingly, respondent does not contend that the no-change
letter itself effected a rescission of the notice of deficiency.
Thus, under the circumstances, we do not agree with respondent
that petitioner unreasonably protracted the proceedings when she
filed the Tax Court petition, which protected her rights as
explained above.9
However, petitioner did protract the court proceeding by:
(1) Requiring respondent’s district counsel to file an answer (by
not furnishing a copy of the no-change letter, which would have
permitted the immediate filing of a settlement stipulation
8
See also Rev. Proc. 88-17, 1988-1 C.B. 692, regarding the
procedure to be followed, and Form 8626 (Agreement to Rescind
Notice of Deficiency), regarding the IRS form to be utilized.
9
We also note that the commencement of a case in this
Court pursuant to a notice of deficiency generally precludes the
Commissioner from issuing any further notice of deficiency for
the same taxable year, see sec. 6212(c), whereas the rescission
of a notice of deficiency pursuant to sec. 6212(d) has no such
effect.
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pursuant to respondent’s offer to do so); (2) executing the form
of decision (containing the stipulation against an award of
costs, which required the Decision to be subsequently vacated);
and (3) filing the Motion in Limine (which was not meritorious).
We therefore hold that petitioner is not entitled to an award of
costs with respect to the portion of the court proceeding that
was protracted because of these matters. See sec. 7430(b)(3).
D. The Amount of Reasonable Costs
Mr. Gardner submitted various statements detailing costs and
expenses with respect to representing petitioner in both the
administrative and court proceedings. Those statements indicate
that Mr. Gardner’s hourly rate was $175.
Absent special factors, an award relating to attorney’s fees
incurred in calendar year 1999 after January 18 of that year is
$130 per hour and incurred in calendar years 2000 and 2001 is
$140 per hour. See sec. 7430(c)(1)(B)(iii); O’Bryon v.
Commissioner, T.C. Memo. 2000-379; Rev. Proc. 2001-13, 2001-3
I.R.B. 337, 341; Rev. Proc. 99-42, 1999-2 C.B. 568, 572; Rev.
Proc. 98-61, 1998-2 C.B. 811, 816. In view of the noncomplex
nature of the substantive issues presented by the notice of
deficiency (i.e., filing status, dependency exemptions, earned
income credit), and further in view of the fact that those issues
were conceded by respondent in the no-change letter before Mr.
Gardner was even retained, we find that no special factor
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justifies an award of attorney’s fees at a rate greater than the
statutory limit.
Regarding the time devoted by Mr. Gardner to this case, we
find that the 4.5 hours spent by him in 1999 in meeting with
petitioner, reviewing the notice of deficiency and related
documentation, and preparing the petition for filing is
reasonable.
We also find that 1.0 hour of Mr. Gardner’s time (0.5 hour
in 1999 and 0.5 hour in 2000) was reasonably devoted to the
period between the filing of the petition and the filing of the
motion for costs. This total consists of the reasonable time
spent in reading respondent’s answer (which conceded the
deficiency), reading and responding to respondent’s
correspondence, and finalizing the form of decision, as revised.
In addition, we find that 9.5 hours of Mr. Gardner’s time
were reasonably devoted to prosecuting petitioner’s motion for
costs in 2000 and 2001. This total consists of the reasonable
time spent in preparing the motion, evaluating respondent’s
Response, preparing the Additional Affidavit pursuant to Rule
232(d), preparing the Reply to respondent’s Response as directed
by the Court, evaluating respondent’s Reply, and participating in
the Court-initiated telephone conference and related negotiations
in January 2001.
Finally, we find that petitioner is entitled to recover the
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$60 court cost incurred in filing her petition. See sec.
7430(c)(1)(A); Rule 20(b).
D. Conclusion
In conclusion, we hold that petitioner is entitled to an
award of administrative and litigation costs in the amount of
$2,110 (i.e., 5.0 hrs. @ $130/hr. + 10.0 hrs. @ 140/hr. + $60).
In so holding, we have carefully considered remaining arguments
made by the parties for a result contrary to that expressed
herein and, to the extent not discussed above, we consider those
arguments to be without merit.
In order to reflect the foregoing,
An appropriate order and
decision will be entered.