T.C. Memo. 2002-151
UNITED STATES TAX COURT
WAYNE HAMPTON AND LOIS HAMPTON, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3092-01. Filed June 13, 2002.
John M. Moles, for petitioners.
Gary L. Bloom, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
SWIFT, Judge: Respondent determined a deficiency of $75,075
in petitioners’ Federal income tax for 1994.
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for 1994.
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After concessions, the remaining issue for decision is
whether petitioners are entitled under section 7430 to an award
of $12,339 in litigation costs.
FINDINGS OF FACT
At the time the petition was filed, petitioners resided in
Watts, Oklahoma.
On December 27, 1996, respondent began an audit of
petitioners’ 1994 Federal income tax liability.
On April 15, 1997, as a result of petitioners’ failure to
attend several scheduled appointments with respondent’s revenue
agent and to provide respondent with requested records,
respondent issued to petitioners a 30-day letter with regard to
petitioners’ 1994 Federal income tax liability.
Petitioners filed with respondent’s Appeals Office a protest
to the above 30-day letter. Because petitioners represented to
the Appeals Office that they possessed records for 1994 that they
had not yet provided to respondent’s revenue agent, respondent’s
Appeals Office returned petitioners’ case to respondent’s
Examination Division for review of the additional records that
petitioners offered to provide.
Over the next 12 months, progress was made by petitioners
and respondent’s revenue agent towards an agreement of
petitioners’ 1994 Federal income tax liability. Petitioners
provided to respondent additional records relating to some but
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not all of the adjustments reflected in respondent’s above 30-day
letter. Upon respondent’s review of the additional records
provided, some adjustments set forth in the 30-day letter were
conceded by respondent, and on August 27, 1998, respondent issued
to petitioners a revised 30-day letter.
On July 16, 1999, after petitioners had provided to
respondent’s revenue agent yet additional records, respondent
issued to petitioners a second revised 30-day letter, reflecting
additional concessions by respondent.
Petitioners again protested to respondent’s Appeals Office
the adjustments set forth in respondent’s second revised 30-day
letter. Petitioners then provided to respondent’s Appeals Office
even more records relating to some of the remaining adjustments
that had previously not been provided. Upon review of these
records, respondent conceded or settled additional adjustments.
On December 7, 2000, respondent mailed to petitioners a
notice of deficiency for petitioners’ 1994 Federal income tax
liability that reflected the adjustments that had not been agreed
to, and on March 7, 2001, petitioners filed their petition
herein.
Shortly prior to the scheduled trial and as a result of
additional records provided by petitioners to respondent for the
first time, petitioners and respondent reached a basis for
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settlement on all of the remaining adjustments set forth in
respondent’s notice of deficiency.
On February 11, 2002, petitioners filed under section
7430(a) their motion for an award of $12,339 in litigation costs.
OPINION
Respondent acknowledges that petitioners substantially
prevailed with respect to the adjustments set forth in
respondent’s notice of deficiency, that petitioners met the net
worth requirement, that petitioners exhausted available
administrative remedies, and that the $12,339 in claimed
litigation costs is reasonable. See sec. 7430(c)(4), (b)(1),
(c)(1), (2), and (3). Respondent contends, however, that
petitioners unreasonably protracted the administrative and court
proceedings herein and that respondent’s position was
substantially justified. See sec. 7430(b)(3) and (4).
Petitioners emphasize that they seek recovery only of
litigation costs incurred after respondent mailed the notice of
deficiency (namely, of litigation costs incurred after
December 7, 2000), and not administrative costs incurred during
the audit examination and Appeals protest when their delay in
producing records to respondent may have delayed the resolution
of the adjustments.
In connection with the audit, appeals, and litigation of
this case (from December 27, 1996, to February 2002), petitioners
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failed to attend various scheduled meetings with respondent’s
representatives and failed timely to produce records.
Respondent’s audit, respondent’s Appeals Office
consideration, and the ultimate settlement of petitioners’ case
in this Court all appear to have been delayed by the haphazard
fashion in which petitioners produced their records.
On the limited record before us in this case, we conclude
that petitioners’ delay in producing records protracted the
administrative and court proceedings within the meaning of
section 7430(b)(3). Petitioners are not entitled to an award of
any litigation costs. See Polyco, Inc. v. Commissioner, 91 T.C.
963, 968 (1988).
To reflect the foregoing,
An appropriate order and
decision will be entered.