T.C. Memo. 2002-110
UNITED STATES TAX COURT
THU CUC THI HUYNH, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 12535-00. Filed May 1, 2002.
Bruce E. Gardner, for petitioner.
Lindsey D. Stellwagen, 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 Petitioner seeks an award of $15,222 in respect of
1
Unless other indicated, all section references are to the
Internal Revenue Code, as amended; however, references to sec.
7430 are to such section in effect at the time that the petition
(continued...)
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respondent’s deficiency determination of $2,347.
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.
(2) Whether petitioner exhausted her administrative
remedies.
(3) Whether petitioner unreasonably protracted the
administrative and court proceedings.
(4) Whether the administrative and litigation costs claimed
by petitioner are 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. See Rule 232(a)(2).
We therefore decide the matter before us based on the record that
has been developed to date.
Petitioner resided in Alexandria, Virginia, at the time that
her petition was filed with the Court.
1
(...continued)
was filed (Dec. 6, 2000). 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); and (2) petitioner
satisfied the applicable net worth requirement, see sec.
7430(c)(4)(A)(ii).
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Background
As a preliminary matter, we note that petitioner’s motion
for an award of costs arises in the context of a deficiency
action in which the only taxable year in issue is 1999.
Nevertheless, the theory behind petitioner’s motion requires that
we also consider the taxable year 1998.
A. Petitioner
Petitioner is a low-income individual who, during 1998 and
1999, worked as a “nail technician” (a manicurist) in various
“nail salons” in northern Virginia. Petitioner is the daughter
of Tra Thi Nguyen (Mrs. Nguyen); petitioner is also the single
parent of a son, Hai Minh Huynh (Hai), who was born in 1990.
B. Petitioner’s Tax Return for 1998
In February 1999, petitioner filed a U.S. Individual Income
Tax Return, Form 1040, for the taxable year 1998. On her return,
petitioner claimed: (1) Head of household filing status; (2) the
standard deduction for that filing status; (3) dependency
exemptions for Mrs. Nguyen and Hai; and (4) an earned income
credit based on her son as a “qualified child”. Petitioner also
claimed a refund of tax in the amount of $1,609.
Petitioner’s 1998 return was selected for examination. By
letter dated April 23, 1999, respondent proposed to: (1) Change
petitioner’s filing status from head of household to single (and
allow only the standard deduction for the latter filing status);
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and (2) disallow the two dependency exemptions and the earned
income credit. Concurrently, respondent requested specific
information and documentation from petitioner to substantiate the
filing status, dependency exemptions, and earned income credit as
claimed on her return.
Petitioner either failed to respond or failed to respond
adequately to respondent’s request. Accordingly, in September
1999, respondent determined a deficiency in petitioner’s income
tax for 1998. The deficiency was attributable to the adjustments
proposed in respondent’s April 23, 1999, letter.
In December 1999, petitioner commenced a case in this Court
by filing a petition for redetermination. See sec. 6213(a).
Petitioner’s case was assigned docket No. 18517-99S. In her
petition, petitioner alleged that she provided her son’s “entire
support”.
Petitioner’s case was considered by respondent’s Appeals
Office at the Philadelphia Service Center. In due course, the
case was settled by respondent’s concession that petitioner was
entitled to the refund of tax as claimed on her return. A
stipulation to that effect was filed by the parties on October 2,
2000. On the following day, the Court entered decision “pursuant
to the stipulation of the parties”.
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C. Petitioner’s Tax Return for 1999
In March 2000, petitioner filed a U.S. Individual Income Tax
Return, Form 1040, for the taxable year 1999. On her return,
petitioner claimed: (1) Head of household filing status; (2) the
standard deduction for that filing status; (3) a dependency
exemption for Hai (but not for Mrs. Nguyen); and (4) an earned
income credit based on her son as a “qualifying child”.
Petitioner also claimed a refund of tax in the amount of $2,177.
Petitioner’s 1999 return was selected for examination. By
letter dated April 21, 2000, respondent sent petitioner an
examination report in which respondent proposed to: (1) Change
petitioner’s filing status from head of household to single (and
allow only the standard deduction for the latter filing status);
and (2) disallow the dependency exemption and the earned income
credit. In the letter, respondent also advised petitioner that
if she disagreed with the proposed changes, respondent would
consider whatever information and documentation that she might
care to submit. In this regard, respondent provided petitioner
with Form 886-H, Supporting Documents, that outlined the type of
information and documentation relevant to resolving issues
related to filing status, dependency exemptions, and the earned
income credit. Finally, respondent advised petitioner of her
right to appeal administratively the proposed changes and
enclosed with the letter a copy of Publication 5, Your Appeal
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Rights and How To Prepare a Protest If You Don’t Agree.
On May 22, 2000, petitioner responded to respondent’s April
21, 2000, letter by providing certain information and
documentation. This material included a landlord’s rental
payment ledger, a statement history from Virginia Power showing
subsidies for “Energy Assistance”, and a “Certificate of
Enrollment” from the Fairfax County Public Schools regarding
petitioner’s son. By letter dated June 1, 2000, respondent
acknowledged receipt of this material and promised to respond by
July 1, 2000.
The information and documentation provided by petitioner was
analyzed by one of respondent’s tax examiners. In a worksheet
dated June 23, 2000, the tax examiner expressed a number of
concerns regarding that material. The examiner’s concerns
included (but were not limited to) the following: (1) The
landlord’s rental payment ledger identified Mrs. Nguyen, rather
than petitioner, as the lessee and as the person who paid the
rent; and (2) the rental payment ledger did not disclose the
number of individuals who occupied the unit.
By letter dated June 23, 2000, respondent advised petitioner
that additional information would be required if respondent were
to rescind the proposed changes to petitioner’s return.
Respondent enclosed with the letter Form 886A, Explanation of
Items, and specifically requested copies of canceled checks to
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verify rental and utility payments. Finally, respondent again
advised petitioner of her right to appeal administratively the
proposed changes and enclosed another copy of Publication 5.
Petitioner did not respond to respondent’s June 23, 2000,
letter, nor did petitioner administratively appeal the proposed
changes to her 1999 return. Accordingly, on October 6, 2000,
respondent sent petitioner a notice of deficiency.
The deficiency as determined by respondent was in the amount
of $2,347 and was based on the same adjustments as proposed in
respondent’s April 21, 2000, letter; i.e., change in petitioner’s
filing status from head of household to single (with a
concomitant change in the amount of the standard deduction) and
disallowance of the dependency exemption and the earned income
credit in respect of petitioner’s son.
On October 23, 2000, petitioner retained her present
counsel. Shortly thereafter, on October 29, 2000, petitioner’s
counsel sent a letter to respondent requesting that the notice of
deficiency be rescinded based on respondent’s concession in
docket No. 18517-99S (the case involving the 1998 year).
Petitioner’s counsel imposed a deadline of November 23, 2000, for
respondent to agree to a rescission. Petitioner’s counsel did
not provide any of the information or documentation that
respondent had previously requested in respondent’s letters dated
April 21, 2000, and June 23, 2000, to petitioner.
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On November 21, 2000, petitioner’s counsel sent another
letter to respondent, extending the rescission deadline to
November 28, 2000. Again, petitioner’s counsel did not provide
any of the information or documentation that respondent had
previously requested in respondent’s letters to petitioner.
Rather, petitioner’s counsel asserted that “you may be subject to
attorney fees and costs by not timely responding to this letter.”
On December 6, 2000, petitioner commenced the present case
by filing a petition for redetermination. See sec. 6213(a).
Petitioner placed the entire amount of the deficiency in dispute,
assigning error to each of the adjustments made by respondent in
the notice of deficiency. Petitioner attached to her petition a
number of documents, all but one of which (monthly telephone
statements) were already in respondent’s possession.
On March 6, 2001, respondent filed an answer. In the
answer, respondent denied all of petitioner’s assignments of
error.
On April 9, 2001, respondent’s paralegal spoke with the
manager of the apartment complex where petitioner resided. This
conversation was followed by a written request for documentation.
The written request stated, in part, as follows:
This is to follow up our telephone conversation of
April 9, 2001, and to request that you forward copies
of the documents you mentioned pertaining to the rental
of Apt. #207 * * * . As I recall, you indicated that
you have a copy of the lease agreement in effect for
1999 for Apt. 207, and the application papers Ms. Tra
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Nguyen [petitioner’s mother] submitted on the first of
November of each year claiming head of household status
for Section 8 housing. I understand that HUD - Fairfax
Co. contributed $482.00 to Ms. Nguyen’s monthly rent
during 1999 in the amount of $724.00 for the 2 bedroom
unit, and that Ms. Nguyen’s payment was $242.00 per
month. I would appreciate receiving copies of
documentation substantiating HUD’s monthly payment and
Ms. Nguyen’s monthly rental payment during 1999,
whether it be copies of canceled checks, rental
ledgers, or any other form of documentation.
In addition, if you will, please provide copies of
Ms. Nguyen’s annual application claiming head of
household for Section 8 assistance.
In late April 2001, respondent received documentation from
the apartment complex manager establishing that Mrs. Nguyen,
petitioner, and petitioner’s son resided in a rent-subsidized
apartment and that Mrs. Nguyen received Supplemental Security
Income (SSI). The documentation also included a statement,
signed by Mrs. Nguyen and petitioner, that identified Mrs. Nguyen
as the head of the household and that showed the amount of Mrs.
Nguyen’s SSI as greater than the amount of petitioner’s income.
By letter dated May 18, 2001, respondent’s paralegal
proposed to petitioner’s counsel that petitioner concede the case
based on the information obtained from petitioner’s apartment
complex. However, the paralegal indicated that if petitioner
preferred, the case could be forwarded to respondent’s Appeals
Office.
On May 24, 2001, petitioner filed a motion for summary
judgment on the ground that respondent “is collaterally estopped
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from pursuing the same tax deficiency issues in the 1999 tax year
that were decided on the merits for the 1998 tax year.”
By letter dated May 28, 2001, petitioner’s counsel replied
to respondent’s paralegal’s letter of May 18, 2001. In his
letter, petitioner’s counsel stated that he was not familiar with
the “interrelationship” of Mrs. Nguyen to petitioner.
In early June 2001, respondent’s counsel obtained
documentation confirming that petitioner’s son’s medical bills
were paid by Medicaid. At the same time, respondent’s counsel
also obtained the administrative file for petitioner’s 1998
taxable year. Included within that file was the original
“Certificate of Enrollment” from the Fairfax County Public
Schools for petitioner’s son. Upon examining that document,
respondent’s counsel concluded that it had been altered. Also
included within the administrative file for petitioner’s 1998
taxable year was another “Certificate of Enrollment” for
petitioner’s son but with a different enrollment date.
Respondent’s counsel concluded that the second certificate had
also been altered.
Respondent’s counsel continued to develop the facts.3
Ultimately, based on her analysis of the administrative files and
information that she gathered from other sources, respondent’s
3
In her Declaration, respondent’s counsel states that
“During this time I did not receive any information from
petitioner’s counsel that would assist in the resolution of these
issues.”
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counsel concluded that governmental agencies and/or Mrs. Nguyen
paid more than one-half of the household expenses and that, as a
consequence, petitioner did not qualify for either head-of-
household filing status or a dependency exemption for her son.
On the other hand, respondent’s counsel concluded that for
purposes of the earned income credit, Hai was the qualifying
child of both Mrs. Nguyen and petitioner. Because respondent’s
counsel was not able to establish that Mrs. Nguyen received
earned income in 1999, respondent’s counsel concluded that under
the “tie-breaker” rule of section 32(c)(1)(C), petitioner was the
individual who was entitled to the earned income credit.
By letter to petitioner’s counsel dated June 13, 2001,
respondent’s counsel stated that “this case should be quickly
resolved.” Respondent’s counsel then unconditionally conceded
the earned income credit issue and proposed that petitioner
concede the filing status, standard deduction, and dependency
exemption issues.
By letter dated June 19, 2001, petitioner’s counsel accepted
respondent’s concession of the earned income credit issue but was
noncommittal regarding the other issues, stating that “I concur
that this case can be quickly resolved when all of the facts are
determined.”
On June 26, 2001, respondent filed with the Court a notice
of objection to petitioner’s motion for summary judgment.
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Respondent filed the objection pursuant to the Court’s Notice of
Filing, which called for the filing of an objection by June 25,
2001. In the objection, respondent maintained that collateral
estoppel was inapplicable with respect to the substantive issues
in dispute because none of the issues in the prior case were
actually litigated by the parties and decided by the Court.
By Order dated June 27, 2001, the Court calendared
petitioner’s motion for summary judgment for hearing on August 8,
2001.
On July 18, 2001, in anticipation of filing a motion for an
award of costs, petitioner executed a Declaration In Support Of
Satisfaction Of The Net Worth Requirements. In the Declaration,
petitioner stated, in part, that “I fully participated in an
appeals office conference while the case was in a docketed
status.”4
On August 3, 2001, the parties filed a Stipulation of Agreed
Adjustments. In the stipulation, petitioner conceded the filing
status, standard deduction, and dependency exemption issues, and
respondent conceded the earned income credit issue. On the same
day, petitioner filed a motion to withdraw petitioner’s motion
4
Respondent contends that petitioner never participated in
an Appeals Office conference. We note that there is nothing in
the record to support petitioner’s statement; we note further
that in petitioner’s Reply, filed Jan. 14, 2002, see infra,
petitioner appears to admit that no Appeals Office conference
ever occurred.
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for summary judgment. In the motion to withdraw, petitioner
stated that she intended to file a motion for an award of costs
within 30 days.
In an Order dated August 7, 2001, the Court stated that
petitioner’s motion for summary judgment lacked merit;
nevertheless, the Court granted petitioner’s motion to withdraw
inasmuch as respondent did not oppose such action.
On September 26, 2001, petitioner filed her motion for an
award of costs. On November 28, 2001, respondent filed a
response, together with a supporting memorandum and Declaration,
objecting to the granting of petitioner’s motion. Thereafter, on
January 14, 2002, petitioner filed a reply, and on January 22,
2002, respondent filed a response.
Discussion
We apply section 7430 as amended by Congress in the Internal
Revenue Service Restructuring and Reform Act of 1998 (RRA 1998),
Pub. L. 105-206, sec. 3101, 112 Stat. 685, 727.5
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
5
Sec. 7430 was amended most recently by Congress in the
Community Renewal Tax Relief Act of 2000 (CRTRA), Pub. L. 106-
554, sec. 319(25), 114 Stat. 2763A-587, 2763A-647. The
amendment, which is effective on the date of enactment of CRTRA
(Dec. 21, 2000), affects only sec. 7430(c)(3) and is purely
clerical in nature.
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(3) did not unreasonably protract the court proceeding. 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. 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
administrative costs under section 7430. 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: (1)
Substantially prevail with respect to either the amount in
controversy or the most significant issue or set of issues
presented; and (2) 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. Sec.
7430(c)(4)(B)(i).
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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. 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. Pierce v. Underwood, supra; Rickel v. 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 Mgmt. 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 the 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
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and circumstances at the time that the Commissioner took his
position. Maggie Mgmt. 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. 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. Powers v. Commissioner, 100 T.C. 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. Sec. 7430(c)(7)(B)(ii). 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. 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; see sec. 7430(c)(7)(A).
Ordinarily, we consider the reasonableness of each of these
positions separately in order to allow the Commissioner to change
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his position. Maggie Mgmt. Co. v. Commissioner, supra at 442
(citing Huffman v. Commissioner, 978 F.2d 1139, 1144-1147 (9th
Cir. 1992), affg. in part and revg. in part on another ground
T.C. Memo. 1991-144). In the present case, however, we need not
follow this approach because respondent’s position was
essentially the same in the administrative and litigation
proceedings. See Maggie Mgmt. Co. v. Commissioner, supra at 442.
More specifically, respondent’s position was that petitioner had
failed to substantiate her entitlement to head of household
filing status (and the standard deduction for that filing status)
and a dependency exemption deduction and earned income credit in
respect of her son.
Deductions and credits are matters of legislative grace.
New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934);
Segel v. Commissioner, 89 T.C. 816, 842 (1987). The same may be
said of a tax-favored filing status such as head of household.
See D’Anjou v. Commissioner, T.C. Memo. 1992-138. Taxpayers are
required to substantiate the deductions and credits that they
claim by maintaining records necessary to establish both the
taxpayers’ entitlement to such items and the proper amount
thereof. Sec. 6001; Meneguzzo v. Commissioner, 43 T.C. 824, 831-
832 (1965); sec. 1.6001-1(a), Income Tax Regs.; see Rule 142(a);
INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); Welch v.
Helvering, 290 U.S. 111, 115 (1933); Segel v. Commissioner,
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supra; Hradesky v. Commissioner, 65 T.C. 87, 90 (1975), affd. per
curiam 540 F.2d 821 (5th Cir. 1976); see also sec. 7491(a)(2)(A)
and (B). A taxpayer’s self-serving declaration is no ironclad
substitute for the records that the law requires. See Weiss v.
Commissioner, T.C. Memo. 1999-17; see also Seaboard Commercial
Corp. v. Commissioner, 28 T.C. 1034, 1051 (1957) (a taxpayer's
income tax return is a self-serving declaration that may not be
accepted as proof for the deduction or exclusion claimed by the
taxpayer); Halle v. Commissioner, 7 T.C. 245, 247 (1946) (a
taxpayer’s return is not self-proving as to the truth of its
contents), affd. 175 F.2d 500 (2d Cir. 1949).
Factual determinations are required in order to decide
whether a taxpayer is entitled to: (1) Head-of-household filing
status, see sec. 2(b); (2) a dependency exemption deduction, see
secs. 151 and 152; or (3) an earned income credit, see sec. 32.
We have held that whenever the resolution of adjustments requires
factual determinations, the Commissioner is not obliged to
concede those adjustments until the Commissioner has received,
and has had a reasonable period of time to verify, adequate
substantiation for the matters in question. Gealer v.
Commissioner, T.C. Memo. 2001-180, and cases cited therein;
O’Bryon v. Commissioner, T.C. Memo. 2000-379, (and cases cited
therein); Cooper v. Commissioner, T.C. Memo. 1999-6.
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In the present case, respondent never received adequate
substantiation regarding petitioner’s claimed filing status and
dependency exemption deduction, and petitioner ultimately
conceded those issues. In contrast, by June 2001, respondent
received adequate substantiation regarding petitioner’s claimed
earned income credit, and respondent immediately conceded that
issue unconditionally.
Petitioner contends that it was unreasonable for respondent
to require adequate substantiation for the adjustments in issue
because respondent was collaterally estopped from even making
those adjustments.6 In this regard, petitioner points to the
decision in petitioner’s favor that was entered in docket No.
18517-99S regarding the taxable year 1998. However, petitioner’s
argument ignores the fact that none of the issues in the prior
case was actually litigated by the parties and decided by the
Court. See Peck v. Commissioner, 90 T.C. 162, 166-167 (1988),
affd. 904 F.2d 525 (9th Cir. 1990), discussing the requirements
for collateral estoppel. Rather, in the case at docket No.
18517-99S, the Court merely entered decision pursuant to the
stipulation of the parties. In this regard, what we said many
years ago in Hart Metal Prods. Corp. v. Commissioner, T.C. Memo.
1969-164, affd. 437 F.2d 946 (7th Cir. 1971) is apropos:
6
We note that petitioner’s contention appears to be
inconsistent with her concession in the present case of the
issues related to filing status, standard deduction, and the
dependency exemption deduction.
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It is well settled that a judgment is conclusive in an
action only as to matters actually litigated and
determined in the prior action and that where a
decision of this Court constitutes only a pro forma
acceptance of an agreement between the parties to
settle their controversy for reasons undisclosed, there
has been no such determination as is required for the
application of the doctrine of collateral estoppel.
United States v. International Bldg. Co., 345 U.S. 503.
In the prior case no trial or argument was had and no
stipulations of facts or briefs were filed. Our
decision of no deficiency was entered pro forma upon
the basis of an agreement of the parties to settle the
case for reasons undisclosed. Accordingly, the doctrine
of collateral estoppel has no application here.
Petitioner also contends that it was unreasonable for
respondent to require adequate substantiation for the adjustments
in issue because (so petitioner alleges) such substantiation was
already in respondent’s files for petitioner’s 1998 taxable year.
However, petitioner’s argument ignores the fact that “each
taxable year stands on its own and must be separately
considered.” Pekar v. Commissioner, 113 T.C. 158, 166 (1999);
see Rinehart v. Commissioner, T.C. Memo. 2002-9; see also Auto.
Club of Mich. v. Commissioner, 353 U.S. 180, 183-184 (1957). In
other words, each taxable year stands on the facts existing in
that year, and, as experience teaches, the facts may change from
year to year.7
7
Petitioner cites Nguyen v. Commissioner, T.C. Memo. 2001-
41, for the proposition that the Commissioner is not
substantially justified when he fails to examine information
already in his possession. Petitioner’s reliance on the Nguyen
case is misplaced, however. In that case, the Commissioner had
obtained documentation for the year in issue from the taxpayer.
Having solicited that documentation, we held that it was
(continued...)
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Petitioner also contends that it was unreasonable for
respondent not to sever the filing status and dependency
exemption issues from the earned income credit issue and allow
petitioner an earned income credit irrespective of having a
“qualifying child”. See sec. 32(c)(1)(A)(ii). Yet petitioner
also tells us (in arguing that an award of costs of $15,222 is
reasonable) that the three issues are “interrelated”. In any
event, petitioner’s contention again ignores the fact that the
allowance of an earned income credit, whether or not based on a
“qualifying child”, requires factual determinations.
In view of the foregoing, we hold that respondent’s position
in the administrative and court proceedings was substantially
justified. In so holding, we have considered other arguments
made by petitioner for a contrary result and found those
arguments to be without merit.
C. Remaining Requirements of Section 7430
Because respondent’s position in the administrative and
court proceedings was substantially justified, we need not decide
whether petitioner exhausted her administrative remedies, whether
petitioner unreasonably protracted the proceedings, or whether
7
(...continued)
unreasonable for respondent not to evaluate it before issuing a
notice of deficiency. In any event, in the present case,
respondent actually evaluated information for the year in issue
obtained from the taxpayer, found it wanting, solicited
additional information, and only then, after petitioner was not
forthcoming with such additional information, issued the notice
of deficiency.
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the administrative and litigation costs claimed by petitioner are
reasonable.
D. Conclusion
In conclusion, we hold that petitioner is not entitled to an
award of administrative and litigation costs.
In order to reflect the foregoing,
An appropriate order and
decision under Rule 155 will
be entered.