T.C. Memo. 2007-223
UNITED STATES TAX COURT
TAE M. & YOUNG J. KIM, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13586-04. Filed August 13, 2007.
Tae M. and Young J. Kim, pro sese.
Michael T. Sargent, for respondent.
MEMORANDUM OPINION
CHIECHI, Judge: This matter is before the Court on peti-
tioners’ motion filed pursuant to Rule 2311 for an award under
section 7430 of reasonable litigation costs (petitioners’ mo-
1
All Rule references are to the Tax Court Rules of Practice
and Procedure. All section references are to the Internal
Revenue Code (Code) in effect at all relevant times.
- 2 -
tion). Neither party has requested a hearing, and we conclude
that a hearing is not necessary. Rule 232(a)(2). Based on the
submissions of the parties, we shall deny petitioners’ motion.
Background
The record establishes and/or the parties do not dispute the
following.2
During 2002, petitioner Young J. Kim (Ms. Kim) was employed
by Fannie Mae. At a time not disclosed by the record before
January 17, 2002, Fannie Mae granted Ms. Kim certain options
(Fannie Mae options) to buy Fannie Mae stock under an employee
stock purchase plan (Fannie Mae ESPP).
Pursuant to the Fannie Mae ESPP, on four dates in January
2002, Ms. Kim exercised certain Fannie Mae options and acquired
certain shares of Fannie Mae stock. In order to have the money
to pay the exercise price of the options exercised, on the dates
on which she exercised such options, Ms. Kim sold for certain
gross proceeds certain shares of Fannie Mae stock acquired as a
result of the exercise of such options.
Fannie Mae issued to Ms. Kim Form W-2, Wage and Tax State-
ment (Fannie Mae Form W-2), for her taxable year 2002. That form
showed total wages, tips, and other compensation of $95,323.62.
2
We incorporate herein by reference the Court’s Memorandum
Findings of Fact and Opinion in Kim v. Commissioner, T.C. Memo.
2007-14 (Court’s Opinion), and set forth the portions of that
Opinion that are relevant to our disposition of petitioners’
motion.
- 3 -
Such total wages, tips, and other compensation included $4,234.94
that was shown as “ESPP” in Box 14 of the Fannie Mae Form W-2.
Fannie Mae also gave Ms. Kim a document entitled “2002 Gross Wage
Analysis” (Fannie Mae wage analysis). That document showed,
inter alia, $95,323.62 as “2002 W2 WAGES”. Such wages included
$4,234.94 that was shown as “ESPP-CEP” and “NON-PAYROLL EARNINGS”
in the Fannie Mae wage analysis.
Petitioners timely filed Form 1040, U.S. Individual Income
Tax Return, for their taxable year 2002 (petitioners’ 2002
return). In petitioners’ 2002 return, petitioners showed, inter
alia, on page one “Wages, salaries, tips, etc.” of $95,323.62 on
line 7. The $95,323.62 of “Wages, salaries, tips, etc.” included
the $4,234.94 that was shown as “ESPP” in Box 14 of the Fannie
Mae Form W-2.
Respondent issued to petitioners a notice of deficiency for
their taxable year 2002 (2002 notice). In that notice, respon-
dent determined a deficiency in, and an accuracy-related penalty
under section 6662(a) (section 6662(a) determination) on, peti-
tioners' Federal income tax (tax) for that year of $8,411 and
$1,682, respectively. In making those determinations, respondent
determined to include in petitioners’ gross income the following
amounts: (1) $21,267 of gross proceeds from certain broker
transactions ($21,267 gross proceeds determination), (2) $622 of
interest income from the United States Department of the Treasury
- 4 -
($622 interest determination), (3) $16 of income from the sale of
certain stock of a company described as “TRAVELERS PROP” ($16
Travelers Prop. determination), and (4) $8 of interest income
from Washington Savings Bank ($8 WSB interest determination).3
Respondent indicated in the 2002 notice that, in making the
determinations in that notice to include such amounts in peti-
tioners’ gross income, respondent used the information set forth
in certain information returns that respondent required the
payers of such amounts to provide to respondent and the taxpayer-
payees. In the 2002 notice, respondent (1) summarized the
information in each such information return pertaining to peti-
tioner Tae M. Kim (Mr. Kim) or to Ms. Kim and (2) included the
address of each payer and the account number for Mr. Kim or Ms.
Kim shown by each payer in each such return.
In making the $21,267 gross proceeds determination in the
2002 notice, respondent relied on four Forms 1099-B, Proceeds
From Broker and Barter Exchange Transactions (Form 1099-B),4 that
EquiServe Inc. (EquiServe) provided, inter alia, to respondent
(EquiServe Forms 1099-B) with respect to Ms. Kim and that showed
3
Petitioners reported $521.61 of interest income from
Washington Savings Bank in Schedule B-Interest and Ordinary
Dividends included as part of petitioners’ 2002 return.
4
The Court takes judicial notice that respondent requires
certain payers to use Form 1099-B in order to report, inter alia,
“Gross proceeds” or “Gross proceeds less commissions and option
premiums” from broker transactions.
- 5 -
a total of $21,267 as “Gross proceeds” ($21,267 of gross pro-
ceeds) from broker transactions described as “EMP PLN SHRS SOLD”.
Petitioners timely filed a petition with the Court with
respect to the 2002 notice. In the petition, petitioners alleged
in pertinent part: “The petitioners disagree with IRS in the
determination of the deficiency because it was based on the
insufficient and inaccurate information.”
On September 16, 2004, respondent filed an answer. In the
answer, respondent denied that the determinations in the 2002
notice were incorrect and requested “that the relief sought in
the petition be denied and that respondent’s determination, as
set forth in the notice of deficiency, be in all respects ap-
proved.”
At various times not disclosed by the record after petition-
ers filed the petition in this case, respondent made requests to
petitioners for information about the $21,267 of gross proceeds
shown in the EquiServe Forms 1099-B. Petitioners did not provide
any information or explanation in response to those requests.
As discussed above, respondent included in the 2002 notice
the address of each payer who provided respondent with an infor-
mation return with respect to Mr. Kim or Ms. Kim, including the
address of Equiserve shown in the EquiServe Forms 1099-B and the
account number for Ms. Kim shown in those forms. Nonetheless, on
August 24, 2005, petitioners sent respondent a letter that stated
- 6 -
in pertinent part:
We received your letter dated August 12, 2005 concern-
ing Stipulation of Facts in preparation of Tax Court
hearing in the case. In order to respond accurately
and diligently in the process, we need the information
and documents in relation to UNREPORTED INVESTMENT
INCOME $21,283.00 including the follows:
- Copies of all IRS documents and reports indicating
petitioners’ Unreported Investment Income $21,283.00.
- Name and address of broker or agent who conducted the
transaction for petitioners in generating the unre-
ported investment income $21,283.00.
* * * * * * *
Since the required process has to be accomplished
without delay, we request your swift response in this
matter. We are unable to attend August 31, 2005 con-
ference with you since we need to contact the bro-
ker/agent and verify the investment income of
$21,283.00. [Reproduced literally.]
On September 9, 2005, petitioners sent respondent another
letter that stated in pertinent part:
We wrote a letter dated August 24, 2005 to you
requesting documents IRS has in relation to the
petitioners’ UNREPORTED INVESTMENT INCOME $21,283.00
and other. We have not received them from you.
Since we do not know what security/stock generated
investment income $21,283.00 and who was the
agent/broker for the sale or transaction in generating
investment income $21,283.00 for petitioners, we need
copies of document and/or report IRS received from
agent/broker or any company as to petitioners’
investment income $21,283.00.
We need agent/broker’s name and mailing address to
contact them to ask how the $21,283.00 investment
income was generated in the case for petitioners.
[Reproduced literally.]
On September 22, 2005, petitioners sent respondent a third
- 7 -
letter that stated in pertinent part:
We made written requests to you twice to receive copies
of the documents as stated in the previous letters.
But, we have not received any response from you.
We again request copies of the documents in relation to
unreported investment income. If we do not hear from
you very soon, we may notify this matter to Tax Court
judge. [Reproduced literally.]
On September 30, 2005, respondent sent petitioners a letter
in which respondent restated the information shown in the
EquiServe Form 1099-B’s that respondent had summarized in the
2002 notice, including the address of EquiServe and the account
number of Ms. Kim shown in such forms.
At a time not disclosed by the record after petitioners
failed to provide any information or explanation in response to
respondent’s requests to them for information about the $21,267
of gross proceeds shown in the EquiServe Forms 1099-B, but before
December 2005, respondent asked Computershare (formerly
EquiServe) for information about such gross proceeds shown in
such forms. Respondent also asked Fannie Mae for any relevant
information.
On a date in December 2005 before December 19, respondent
received certain information from Fannie Mae relevant to the
$21,267 gross proceeds determination. Based upon that informa-
tion, respondent concluded (1) that the total wages, tips, and
other compensation shown in the Fannie Mae Form W-2 included an
amount of compensation, i.e., $4,234.94, resulting from Ms. Kim’s
- 8 -
exercise of certain Fannie Mae options and (2) that petitioners
had included that amount in Wages, salaries, tips, etc. in
petitioners’ 2002 return. Based upon the information that Fannie
Mae provided to respondent in December 2005, respondent further
concluded that the $21,267 of gross proceeds shown in the
EquiServe Forms 1099-B constituted gross proceeds from the sales
of certain Fannie Mae stock that Ms. Kim acquired as a result of
her exercise of certain Fannie Mae options.
As a result of having received in December 2005 and analyzed
certain information from Fannie Mae, on December 19, 2005, before
the trial in this case, respondent conceded the $21,267 gross
proceeds determination and the section 6662(a) determination.5
On December 12, 2005, respondent received from petitioners
Form 1040X, Amended U.S. Individual Income Tax Return, with
respect to their taxable year 2002 (petitioners’ 2002 amended
return). In petitioners’ 2002 amended return, petitioners
reduced by $4,234.94 the adjusted gross income reported in
petitioners’ 2002 return and claimed a refund of $1,255. In
support thereof, petitioners gave the following explanation in
petitioners’ 2002 amended return: “Excluding $4,234.94 ESPP gain
from W-2. Including $4,234.94 ESPP gain in Capital Gains on
5
Respondent conceded the section 6662(a) determination even
though that determination was based on not only the $21,267 gross
proceeds determination but also other determinations in the 2002
notice that the Court ultimately resolved in favor of respondent.
- 9 -
Schedule D.” Petitioners included as part of petitioners’ 2002
amended return a copy of Schedule D, Capital Gains and Losses
(2002 Schedule D), that they included as part of petitioners’
2002 return, on which they made the following changes:6 Peti-
tioners claimed (1) short-term capital gains totaling $4,234.94
from the sale of certain Fannie Mae stock that Ms. Kim acquired
as a result of her exercise of the Fannie Mae options and
(2) long-term capital losses totaling $15,949.06 from the sale of
certain stock of three companies. In petitioners’ amended 2002
Schedule D, petitioners (1) added the $15,949.06 of additional
long-term capital losses claimed in that amended schedule to the
$3,117.40 of long-term capital loss claimed in petitioners’ 2002
Schedule D included as part of petitioners’ 2002 return and
(2) as a result, claimed total long-term capital losses for their
taxable year 2002 totaling $19,066.46. In petitioners’ amended
2002 Schedule D, petitioners netted the $4,234.94 of short-term
capital gains and the $19,066.46 of long-term capital losses
claimed in that amended schedule and, as a result, claimed a net
capital loss of $14,831.52.7 Respondent did not accept as cor-
6
We shall refer to the copy of the 2002 Schedule D on which
petitioners made certain changes as petitioners’ amended 2002
Schedule D.
7
In petitioners’ 2002 return, as prescribed by sec. 1211(b),
petitioners claimed as a deduction only $3,000 of the $3,117.40
net capital loss claimed in the 2002 Schedule D included as part
of that return. Thus, the $14,831.52 net capital loss claimed in
(continued...)
- 10 -
rect petitioners’ 2002 amended return.
In their pretrial memorandum, during trial, and on brief,
petitioners focused only on the increases in short-term capital
gains and long-term capital losses of $4,234.94 and $15,949.06,
respectively, claimed in petitioners’ 2002 amended return, and
not on any of the determinations in the 2002 notice that respon-
dent did not concede, including the $8 WSB interest determina-
tion. (We shall refer to the claimed respective increases in
short-term capital gains and long-term capital losses as peti-
tioners’ alleged capital gain issue and petitioners’ alleged
capital loss issue, respectively.) It was only when the Court
asked Mr. Kim, petitioners’ only witness at trial, about the $8
WSB interest determination that petitioners even addressed that
determination. The following exchange took place during Mr.
Kim’s direct testimony:
THE COURT: * * * you also don’t have any informa-
tion about the interest income from Washington Savings
Bank?
THE WITNESS: No. No. Actually, when we prepare
the 1040 for 2002, I mean, we diligently tried to get
an information, diligently tried to report every income
we have, even penny, but, I mean, there may be, I don’t
know, maybe some other matter. But we still believe
that what we reported is very, very accurate and the
7
(...continued)
petitioners’ amended 2002 Schedule D did not entitle petitioners
to a larger net capital loss deduction for 2002. However, the
increased net capital loss claimed in petitioners’ amended 2002
Schedule D did affect the amount of petitioners’ claimed capital
loss carryover to other taxable years.
- 11 -
1040 we reported is actually that we reported more than
we should. That means that we overpaid. That’s what
we think. [Transcript reproduced literally.]
On cross-examination, respondent’s counsel asked Mr. Kim
certain questions about the $8 WSB interest determination that
the Court raised with Mr. Kim during his direct testimony. Those
questions and Mr. Kim’s answers were:
Q Mr. Kim, did you have an account with Wash-
ington Savings Bank in 2002?
A I think in year 2002 probably yes.
Q What type of account was it? Do you remem-
ber?
A I don’t remember.
Q A checking account?
A I mean, that’s my guess, but I do not want to
-- probably saving, but maybe --
THE COURT: He doesn’t know for sure.
THE WITNESS: Yeah, I don’t know.
BY MS. BAKER:
Q Do you recall if any of those accounts earned
interest?
A Oh, yes. Yes.
Q Do you know how much interest you earned on
those accounts during 2002?
A I don’t remember. I just received the report
from them and I reflected that one.
Q Do you have a copy of that report?
A At this time, no. [Transcript reproduced
literally.]
- 12 -
In the Court’s Opinion, the Court addressed the $622 inter-
est determination, the $16 Travelers Prop. determination, the $8
WSB interest determination, petitioners’ alleged capital gain
issue, and petitioners’ alleged capital loss issue. In the
Court’s Opinion, the Court held for respondent on all of the
foregoing issues except the $8 WSB interest determination.
In petitioners’ motion and the affidavit attached thereto,
petitioners claimed the following litigation costs (claimed
litigation costs):
Tax Court filing fee: $60.00
Mailing costs: $90.15
Delivery fee: $330.00
Consultation costs: $2,900.00
Document preparation: $640.45
Parking fee: $96.40
Transportation: $647.50
Telephone calls: $82.40
Petitioners did not provide any additional information with
respect to the claimed litigation costs.
Discussion
As pertinent here, section 7430(a) authorizes an award to
the prevailing party of reasonable litigation costs incurred in
connection with a case brought in the Court against the Commis-
sioner of Internal Revenue (Commissioner) involving the determi-
nation of any tax, interest, or penalty under the Code. The term
“prevailing party” means, in general, any party who (1) has
substantially prevailed with respect to (a) the amount in contro-
versy, sec. 7430(c)(4)(A)(i)(I), or (b) the most significant
- 13 -
issue or set of issues presented, sec. 7430(c)(4)(A)(i)(II), and
(2) meets the net worth requirements of 28 U.S.C. sec.
2412(d)(2)(B) (net worth requirements), sec. 7430(c)(4)(A)(ii).
In order to qualify for an award under section 7430(a), the
prevailing party must (1) have exhausted the available adminis-
trative remedies, sec. 7430(b)(1), and (2) not have unreasonably
protracted the court proceeding, sec. 7430(b)(3). The party
moving for an award under section 7430(a) has the burden of
establishing that all of the foregoing criteria have been satis-
fied and that the costs claimed are reasonable litigation costs
incurred in connection with the court proceeding under section
7430(a)(2). Rule 232(e); see also Corson v. Commissioner, 123
T.C. 202, 205-206 (2004).
There is an exception to the definition in section
7430(c)(4)(A) of the term “prevailing party”. That exception is
found in section 7430(c)(4)(B), which provides: “A party shall
not be treated as the prevailing party in a proceeding * * * if
the United States establishes that the position of the United
States in the proceeding was substantially justified.” Sec.
7430(c)(4)(B)(i).
The position of the United States is substantially justified
if it “is one that is ‘justified to a degree that could satisfy a
reasonable person’ or that has a ‘reasonable basis both in law
and fact.’ Pierce v. Underwood, 487 U.S. 552, 565 (1988)”.
- 14 -
Swanson v. Commissioner, 106 T.C. 76, 86 (1996). “A position has
a reasonable basis in fact if there is relevant evidence that a
reasonable mind might accept as adequate to support a conclusion.
See Pierce v. Underwood, supra at 564-565.” Corkrey v. Commis-
sioner, 115 T.C. 366, 373 (2000). In determining whether the
position of the Commissioner was substantially justified, we must
“consider the basis for respondent’s legal position and the
manner in which the position was maintained.” Wasie v. Commis-
sioner, 86 T.C. 962, 969 (1986). The fact that the Commissioner
concedes an issue is not conclusive as to whether the Commis-
sioner’s position with respect to that issue was substantially
justified. See Corkrey v. Commissioner, supra; Sokol v. Commis-
sioner, 92 T.C. 760, 767 (1989); Wasie v. Commissioner, supra at
968-969.
In respondent’s response to petitioners’ motion, respondent
indicates that petitioners have substantially prevailed with
respect to the amount in controversy within the meaning of
section 7430(c)(4)(A)(i)(I). However, respondent argues that
respondent’s position was substantially justified with respect to
the $21,267 gross proceeds determination, the $622 interest
determination, the $16 Travelers Prop. determination, the section
6662(a) determination, petitioners’ alleged capital gain issue,
and petitioners’ alleged capital loss issue. Therefore, accord-
ing to respondent, petitioners are not the prevailing party
- 15 -
within the meaning of section 7430(c)(4) with respect to any of
those issues. Respondent does not maintain that respondent’s
position with respect to the $8 interest determination was
substantially justified.
Respondent concedes in respondent’s response to petitioners’
motion that petitioners have exhausted the available administra-
tive remedies, see sec. 7430(b)(1), and does not dispute that
petitioners meet the net worth requirements, see sec.
7430(c)(4)(A)(ii). However, respondent argues that petitioners
unreasonably protracted the proceeding, see sec. 7430(b)(3), and
that petitioners have not provided any information that estab-
lishes that they incurred the claimed litigation costs, the issue
or issues to which such claimed costs relate, the amount of such
claimed costs incurred with respect to each such issue, and that
such claimed costs are reasonable, see sec. 7430(a)(2).
Because respondent has taken an issue-by-issue approach in
advancing respondent’s arguments in support of respondent’s
position that the Court should deny petitioners’ motion, we shall
do the same. See Swanson v. Commissioner, supra at 102.
As pertinent here, the position of respondent for purposes
of section 7430(c)(7)(A) with respect to an issue in this case is
the position first taken by respondent with respect to that
issue. See Maggie Mgmt. Co. v. Commissioner, 108 T.C. 430, 442
(1997). With respect to the determinations in the 2002 notice,
- 16 -
respondent’s position for purposes of section 7430(c)(7)(A) is
that set forth in the answer. See id. With respect to petition-
ers’ alleged capital gain issue and petitioners’ alleged capital
loss issue, respondent’s position for purposes of section
7430(c)(7)(A) is that set forth in respondent’s pretrial memoran-
dum.8
We first address respondent’s position for purposes of
section 7430(c)(7)(A) with respect to the $622 interest determi-
nation, the $16 Travelers Prop. determination, petitioners’
alleged capital gain issue, and petitioners’ alleged capital loss
issue. In the Court’s Opinion, the Court held in favor of
respondent, and against petitioners, with respect to each of
those matters. On the record before us, we find (1) that respon-
dent has met respondent’s burden under section 7430(c)(4)(B)(i)
8
Petitioners did not raise petitioners’ alleged capital gain
issue and petitioners’ alleged capital loss issue until Dec. 12,
2005, when respondent received petitioners’ 2002 amended return.
As a result, respondent was not able to take a position with
respect to either of those issues in the answer that respondent
filed on Sept. 16, 2004. In respondent’s pretrial memorandum,
respondent indicated that if the Court were to rule that peti-
tioners’ 2002 amended return is admissible into evidence, a trial
would be necessary with respect to the issues raised therein.
However, respondent did not elaborate further in respondent’s
pretrial memorandum. At trial, respondent made clear that
respondent disagreed with petitioners’ claims regarding petition-
ers’ alleged capital gain issue and petitioners’ alleged capital
loss issue. However, respondent did not elaborate further. It
was only on brief that respondent gave reasons in support of
respondent’s position in respondent’s pretrial memorandum that
petitioners are not entitled to the respective increases in
short-term capital gains and long-term capital losses claimed in
petitioners’ 2002 amended return.
- 17 -
of establishing that respondent’s position was substantially
justified and (2) that petitioners are not the prevailing party
under section 7430(c)(4) with respect to each such matter.9
We next address respondent’s position for purposes of
section 7430(c)(4)(A) with respect to the section 6662(a) deter-
mination to the extent that determination imposed an accuracy-
related penalty on the respective portions of the underpayment
for petitioners’ taxable year 2002 (2002 underpayment) that were
attributable to the $622 interest determination and the $16
Travelers Prop. determination. For the reasons set forth above,
on the record before us, we find (1) that respondent has met
respondent’s burden under section 7430(c)(4)(B)(i) of establish-
ing that respondent’s position was substantially justified and
(2) that petitioners are not the prevailing party under section
7430(c)(4) with respect to the section 6662(a) determination to
the extent that determination imposed an accuracy-related penalty
on such respective portions of the 2002 underpayment.10
We next address respondent’s position for purposes of
section 7430(c)(7)(A) with respect to the $21,267 gross proceeds
determination. The Court has held that “whenever there is a
9
Since we have found that petitioners are not the prevailing
party under sec. 7430(c)(4), we need not, and shall not, address
any of the other requirements in sec. 7430 that petitioners must
satisfy in order to be entitled to litigation costs under sec.
7430(a).
10
See supra note 9.
- 18 -
factual determination, the Commissioner is not obliged to concede
a case until the Commissioner receives the necessary documenta-
tion to prove the taxpayer’s contentions”, Corkrey v. Commis-
sioner, 115 T.C. at 375 n.5, and that “after the Commissioner
receives the proper documentation, a reasonable period of time
must be given to analyze the documents and make adjustments
accordingly”, id. On numerous occasions, the Court has found
that, in the absence of evidence undermining the reliability of
information returns provided to the Commissioner or otherwise
substantiating a taxpayer’s contentions, reliance by the Commis-
sioner on information returns is substantially justified. See,
e.g., id.
In the instant case, respondent relied on the EquiServe
Forms 1099-B in making the $21,267 gross proceeds determination.
At various times, respondent made requests to petitioners for
information about such gross proceeds. Petitioners did not
provide any information or explanation in response to those
requests. It was only after respondent requested information
from Computershare (formerly EquiServe) and Fannie Mae, and
received in December 2005 relevant information from Fannie Mae,
that respondent had any evidence showing that respondent’s
$21,267 gross proceeds determination was incorrect. On December
19, 2005, shortly after having received that information from
Fannie Mae, respondent conceded that determination. On the
- 19 -
record before us, we find (1) that respondent has met respon-
dent’s burden under section 7430(c)(4)(B)(i) of establishing that
respondent’s position was substantially justified and (2) that
petitioners are not the prevailing party under section 7430(c)(4)
with respect to the $21,267 gross proceeds determination.11
We next address respondent’s position for purposes of
section 7430(c)(7)(A) with respect to the section 6662(a) deter-
mination to the extent that determination imposed an accuracy-
related penalty on the portion of the 2002 underpayment that was
attributable to the $21,267 gross proceeds determination.
Respondent conceded the section 6662(a) determination at the time
respondent conceded the $21,267 gross proceeds determination.
For the reasons set forth above, on the record before us, we find
(1) that respondent has met respondent’s burden under section
7430(c)(4)(B)(i) of establishing that respondent’s position was
substantially justified and (2) that petitioners are not the
prevailing party under section 7430(c)(4) with respect to the
section 6662(a) determination to the extent that determination
imposed an accuracy-related penalty on the portion of the 2002
underpayment that was attributable to the $21,267 gross proceeds
determination.12
We now address whether petitioners are entitled to litiga-
11
See supra note 9.
12
See supra note 9.
- 20 -
tion costs under section 7430(a) in connection with the $8 WSB
interest determination and the section 6662(a) determination to
the extent that determination imposed an accuracy-related penalty
on the portion of the 2002 underpayment that was attributable to
that determination. As discussed above, respondent does not
maintain that respondent’s position with respect to the $8 WSB
interest determination was substantially justified under section
7430(c)(4)(B). However, according to respondent, “this issue did
not require a large expenditure of time or resources. The bulk
of the trial and the expense of the proceeding related to the
capital gains issue raised by petitioners.”
In their pretrial memorandum, during trial, and on brief,
petitioners focused only on petitioners’ alleged capital gain
issue and petitioners’ alleged capital loss issue, and not on,
inter alia, the $8 WSB interest determination. It was only when
the Court asked Mr. Kim during his direct testimony whether
petitioners had any information bearing on the $8 WSB interest
determination that petitioners even addressed that determination.
On the record before us, we find it difficult to believe that
petitioners incurred any litigation costs before, during, or
after trial with respect to the $8 WSB interest determination or
the section 6662(a) determination to the extent that determina-
tion imposed an accuracy-related penalty on the portion of the
- 21 -
2002 underpayment that was attributable to that determination.13
On that record, we find that petitioners have failed to carry
their burden of establishing that they incurred any litigation
costs with respect to those matters.14
Based upon our examination of the entire record before us,
we find that petitioners have failed to carry their burden of
establishing that they are entitled to litigation costs under
section 7430(a).
We have considered all of petitioners’ contentions and
13
As discussed above, respondent conceded prior to trial the
section 6662(a) determination. Consequently, petitioners should
not have incurred any litigation costs with respect to that
determination after that concession.
Assuming arguendo that the record had established that
petitioners incurred litigation costs with respect to the $8 WSB
interest determination and the section 6662(a) determination to
the extent that determination imposed an accuracy-related penalty
on the portion of the 2002 underpayment attributable to that
determination, on the record before us, we find that petitioners
have failed to carry their burden of establishing the respective
amounts of litigation costs incurred with respect to the $8 WSB
determination and the section 6662(a) determination to the extent
that determination imposed an accuracy-related penalty on the
portion of the 2002 underpayment attributable to that determina-
tion, the nature of any such costs, and the reasonableness of any
such costs.
14
Since we have found that petitioners failed to carry their
burden of establishing that they incurred any litigation costs
with respect to the $8 WSB interest determination and the section
6662(a) determination to the extent that determination imposed an
accuracy-related penalty on the portion of the 2002 underpayment
that was attributable to that determination, we need not, and
shall not, address respondent’s argument that petitioners unrea-
sonably protracted the proceeding, see sec. 7430(b)(3), and
therefore are not entitled to litigation costs under sec.
7430(a).
- 22 -
arguments that are not discussed herein, and we find them to be
without merit, irrelevant, and/or moot.
To reflect the foregoing,
An order denying petitioners’
motion will be issued.