T.C. Memo. 2002-270
UNITED STATES TAX COURT
CASEY A. ROGINIEL, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2328-01. Filed October 24, 2002.
Marshall C. Sanders, for petitioner.
Robert Taylor, for respondent.
MEMORANDUM OPINION
PAJAK, Special Trial Judge: This case is before the Court
pursuant to petitioner’s motion for litigation costs under
section 7430 and Rules 230 through 233. Unless otherwise
indicated, all section references are to the Internal Revenue
Code. All Rule references are to the Tax Court Rules of Practice
and Procedure.
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Petitioner seeks to recover litigation costs of $1,560.
In accordance with Rule 232(a), we dispose of the motion
before us without a hearing. Accordingly, we rule on
petitioner’s motion on the basis of the parties’ submissions and
the record in this case. The underlying issues raised in the
petition were settled by a stipulation of settlement.
At the time the petition in this case was filed, petitioner
resided in Phoenix, Arizona.
By letter dated July 24, 2000 (30-day letter), respondent
sent petitioner an examination report with respect to
petitioner’s 1999 taxable year in which respondent determined
that petitioner’s filing status was changed from head of
household to single; the dependency exemptions for petitioner’s
two children were disallowed; and the earned income credit was
disallowed. In the 30-day letter, respondent advised petitioner
that if he disagreed with the proposed changes, respondent would
consider any supporting information and documentation that he
might care to submit. Along with the 30-day letter, respondent
provided petitioner with Form 886-H, Supporting Documents, which
outlined the type of information and documentation relevant to
resolving issues related to filing status, dependency exemptions,
and the earned income credit. Respondent also advised petitioner
of his right to file an administrative appeal for the proposed
changes and enclosed with the 30-day letter a copy of Publication
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5, Your Appeal Rights and How To Prepare a Protest If You Don’t
Agree.
Petitioner did not request an Appeals Office hearing.
On August 6, 2000, petitioner responded to respondent’s July
24, 2000, letter by providing a copy of petitioner’s decree of
dissolution of marriage (decree). The decree designated
petitioner as the primary residential parent for both children.
In response to petitioner’s August 6, 2000, submission,
respondent sent petitioner Form 886-A, Explanation of Items,
which indicated that additional information was required by
respondent. Respondent specifically stated that acceptable forms
of supporting documentation to verify the children’s residency
would include “SCHOOL AND/OR MEDICAL RECORDS LISTING YOUR NAME AS
PARENT OR GUARDIAN, THE CHILD’S NAME, THE ADDRESS OF RECORD DATED
JANUARY THROUGH DECEMBER OF THE TAX YEAR.” Acceptable forms of
supporting documentation to verify support would include
cancelled checks or receipts for rent/mortgage and utilities.
The letter also stated that “IF YOU ARE ABLE TO FURNISH THE
REQUIRED DOCUMENTATION WITHIN 90 DAYS, WE WILL BE ABLE TO
RECONSIDER OUR CURRENT DETERMINATION.”
On December 7, 2000, respondent mailed to petitioner a
notice of deficiency in the amount of $4,324 for the taxable year
1999. The notice of deficiency reflected the same adjustments as
determined in respondent’s 30-day letter.
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On or about December 20, 2000, respondent received
additional documentation from petitioner. The documentation
included: (1) a letter from the school attended by petitioner’s
children; (2) Social Security cards for the children; (3)
magazine covers addressed to the children at petitioner’s home
address; and (4) a customer statement to petitioner for child
care for the children. The school letter did not list the
children’s home address.
On or about January 23, 2001, petitioner met with his
counsel.
On January 26, 2001, respondent sent a second Form 886-A to
petitioner requesting additional information to substantiate
petitioner’s positions. Again, respondent enclosed a Form 886-H
detailing acceptable documentation.
On February 20, 2001, petitioner’s petition was filed. On
April 24, 2001, respondent’s answer was filed.
After the petition was filed, Appeals Officer Loren L.
Peterson (Mr. Peterson) was assigned petitioner’s case. On or
about May 24, 2001, Mr. Peterson mailed a letter to petitioner to
schedule a conference to attempt to settle the case without going
to trial.
During July 2001, respondent and petitioner’s counsel had
two telephone conferences with regard to petitioner’s case. As a
result of the telephone negotiations and the submissions of the
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information on or about December 20, 2000, Mr. Peterson
determined that petitioner was entitled to the head of household
filing status, the two dependency exemptions, and the earned
income credit. Respondent informed petitioner’s counsel that no
concession for attorney’s fees and costs would be made.
On or about September 7, 2001, respondent sent petitioner’s
counsel a proposed Stipulation Decision conceding all of the tax
issues.
Between November 21, 2001, and January 2, 2002, respondent
attempted, via telephone calls and letters, to contact
petitioner’s counsel. The letters included additional copies of
the proposed Stipulation Decision.
Sometime in January 2002, petitioner’s counsel contacted
respondent. As a result, respondent prepared and mailed a
Stipulation of Agreed Issues to petitioner’s counsel.
On January 28, 2002, at the calendar call of the case,
petitioner filed a Motion for Attorney’s Fees and Costs and the
Stipulation of Agreed Issues.
Section 7430 permits the award of reasonable litigation
costs to a taxpayer in an administrative or court proceeding
brought against the United States in connection with the
determination of any tax, interest, or penalty under the Internal
Revenue Code. An award of litigation costs may be made where the
taxpayer (1) is the “prevailing party”, (2) exhausted available
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administrative remedies, (3) did not unreasonably protract the
administrative or judicial proceeding, and (4) claimed reasonable
litigation costs. Sec. 7430(a), (b)(1), (3), (c). These
requirements are conjunctive. Minahan v. Commissioner, 88 T.C.
492, 497 (1987). Except as provided in section 7430(c)(4)(B),
petitioner bears the burden of proving that he meets each of the
requirements of section 7430. Rule 232(e).
To be a prevailing party, a 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) meet certain net worth requirements. Sec.
7430(c)(4)(A)(i) and (ii). However, the taxpayer is not entitled
to an award for reasonable litigation costs if the Commissioner
shows that the position of the United States in the proceeding
was substantially justified. Sec. 7430(c)(4)(B)(i).
Respondent concedes that petitioner substantially prevailed
and meets the net worth requirements. Respondent argues,
however, that petitioner is not the prevailing party because
respondent was substantially justified in maintaining his
position in the administrative and judicial proceedings.
Respondent also argues that petitioner did not exhaust all
administrative remedies, that petitioner unreasonably protracted
the proceedings, and that the fees requested are unreasonable.
We focus first on whether petitioner exhausted all available
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administrative remedies. An award for litigation costs shall not
be made unless the taxpayer has exhausted the administrative
remedies available within the Internal Revenue Service. Sec.
7430(b)(1); sec. 301.7430-1(b)(1), Proced. & Admin. Regs. We
find that petitioner has not met this requirement. The 30-day
letter sent to petitioner specifically provided that if
petitioner disagreed with respondent’s findings, petitioner had
“the right to file an administrative appeal”. Prior to filing
his petition in the Tax Court, petitioner never requested or
participated in a conference with the Appeals Office with respect
to the 1999 taxable year, although such a conference was
available. Section 301.7430-1(b)(1), Proced. & Admin. Regs.,
provides that, where a conference with the Appeals Office is
available, administrative remedies are exhausted when the
taxpayer (1) participated in a conference with the Appeals Office
before petitioning this Court, or (2) prior to the issuance of
the notice of deficiency, requested such a conference and no such
conference was granted. Haas & Associates Accountancy Corp. v.
Commissioner, 117 T.C. 48, 57-59 (2001); Swanagan v.
Commissioner, T.C. Memo. 2000-294; Patel v. Commissioner, T.C.
Memo. 1998-306; Jacoby v. Commissioner, T.C. Memo. 1997-384.
Because petitioner did not exhaust his administrative
remedies, we have no choice but to rule for respondent. Thus, we
find no reason to delve into the other requirements. We have
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considered all other arguments made by petitioner and found them
to be either irrelevant or without merit. Accordingly, we hold
that petitioner does not qualify for an award of litigation costs
under section 7430.
To reflect the foregoing,
An appropriate order
and decision will be entered.