T.C. Memo. 2011-136
UNITED STATES TAX COURT
ARTHUR DALTON, JR. AND BEVERLY DALTON, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 23510-06L. Filed June 20, 2011.
Ralph A. Dyer, for petitioners.
Erika B. Cormier, for respondent.
MEMORANDUM OPINION
WELLS, Judge: This case is before the Court on petitioners’
motion for recovery of reasonable litigation and administrative
costs, filed pursuant to section 7430 and Rule 231.1 Petitioners
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect at the time petitioners filed
their petition or incurred their litigation costs, as
(continued...)
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seek to recover litigation and administrative costs of $55,580
incurred in contesting respondent’s rejection of their offer-in-
compromise because of an alleged nominee interest in a trust. We
must decide: (1) Whether petitioners’ motion is deficient on its
face; (2) whether respondent has shown that his position was
substantially justified; (3) whether petitioners are entitled to
litigation and administrative costs claimed; and (4) whether the
attorney’s fees and other costs that petitioners seek to recover
are reasonable. Neither party requested an evidentiary hearing,
and we conclude that a hearing is not necessary for the proper
disposition of petitioners’ motion. See Rule 232(a)(2).
Background
The merits of the underlying case were decided in our prior
opinions in this case, Dalton v. Commissioner, T.C. Memo. 2008-
165 (Dalton I), and Dalton v. Commissioner, 135 T.C. 393 (2010)
(Dalton II). The findings of fact set forth in those opinions
are incorporated herein by reference. We restate below only
those findings that are relevant to the issues presented by
petitioners’ motion for litigation and administrative costs.
The central issue in the underlying case was whether
respondent’s Appeals Office abused its discretion when it
determined that petitioners held a “nominee” interest in certain
1
(...continued)
appropriate, and all Rule references are to the Tax Court Rules
of Practice and Procedure.
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real estate held in trust (the Poland property). During the
proceedings before the Internal Revenue Service (IRS) Appeals
Office, petitioners (hereinafter referred to individually as Mr.
Dalton Jr. and Mrs. Dalton Jr.) sought to establish that they
were entitled to an offer-in-compromise on the basis of financial
hardship. The IRS Appeals Office obtained from the IRS Office of
Chief Counsel an advisory opinion on the applicability of alter
ego or nominee principles of ownership to petitioners’ situation.
In that opinion, the IRS Office of Chief Counsel considered
various factors derived from Federal caselaw and concluded that a
nominee relationship did exist between petitioners and the trust.
The advisory opinion was silent on the issue of whether
petitioners had an interest in the trust under State law.
On October 24, 2006, the IRS Appeals Office issued to each
petitioner a separate Notice of Determination Concerning
Collection Action(s) Under Section 6320 and/or 6330 (initial
notice of determination). Petitioners each received the initial
notice of determination on or about October 31, 2006. It stated
that the Appeals Office had rejected petitioners’ collection
alternative, and attachments to the notice explained that the IRS
had determined that petitioners had a nominee interest in the
trust and that any collection alternative would have to
incorporate the equity petitioners had in the property owned by
the trust.
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On November 16, 2006, petitioners filed a timely petition in
this Court seeking judicial review of the proposed levy action.
Respondent filed a motion for summary judgment, which we denied
in our opinion in Dalton I. In that opinion, we noted that
recent caselaw has made it clear that the primary factor that
must be considered in deciding whether a nominee relationship
exists is whether such a relationship exists under State law.
Because the record was silent as to whether a nominee
relationship existed under Maine law, we remanded the case to the
IRS Appeals Office to consider whether a nominee interest existed
under State law.
On remand, the Appeals Office requested another advisory
opinion from the IRS Office of Chief Counsel. The Office of
Chief Counsel provided an advisory opinion, which summarily
concluded that Maine “does not have a properly developed body of
law regarding nominee ownership.” It then proceeded to conduct a
Federal factors analysis. The advisory opinion concluded that,
under the Federal factors analysis, petitioners had a nominee
interest in the trust property. On December 1, 2008, the Appeals
Office mailed each petitioner a Supplemental Notice of
Determination Concerning Collection Action(s) under Section 6320
and/or 6330 (supplemental notice of determination). The
supplemental notice of determination concluded that Maine law was
silent on the issue of whether petitioners had a nominee interest
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in the property, and it reaffirmed the conclusion that
petitioners had a nominee interest under Federal factors.
After the IRS issued its supplemental notice of
determination, petitioners filed a motion for partial summary
judgment in this Court. In our Opinion in Dalton II, we granted
petitioners’ motion for summary judgment. We held that the IRS
Appeals Office abused its discretion when it sustained the levy
action on the basis of its determination that petitioners had a
nominee interest in the trust property. Dalton II, 135 T.C. at
423. We held that Maine law was not silent on the issue of
whether a nominee interest existed and that, pursuant to Maine
law, petitioners had no such interest in the trust property. Id.
at 407-415. We further concluded that, even under a Federal
factors analysis, petitioners did not have a nominee interest in
the trust. Id. at 415-423.
Discussion
Section 7430(a) provides that the prevailing party in any
administrative or court proceeding may be awarded a judgment for
(1) reasonable administrative costs incurred in connection with
such an administrative proceeding within the IRS, and (2)
reasonable litigation costs incurred in connection with such a
court proceeding. Corson v. Commissioner, 123 T.C. 202, 205
(2004); Maggie Mgmt. Co. v. Commissioner, 108 T.C. 430, 436
(1997). In addition to being the prevailing party, to receive an
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award of reasonable litigation costs a taxpayer must have
exhausted all administrative remedies and must not have
unreasonably protracted the court proceeding. Sec. 7430(b)(1),
(3); Corson v. Commissioner, supra at 205. We do not award costs
unless a taxpayer satisfies all of the section 7430 requirements.
Corson v. Commissioner, supra at 205-206; Minahan v.
Commissioner, 88 T.C. 492, 497 (1987).
A taxpayer is the prevailing party if: (1) The taxpayer
substantially prevailed with respect to the amount in controversy
or the most significant issue or set of issues; (2) the taxpayer
meets the net worth requirements of 28 U.S.C. sec. 2412(d)(2)(B)
(2006); and (3) the Commissioner’s position in the court
proceeding was not substantially justified. Sec. 7430(c)(4)(A)
and (B)(i); see also sec. 301.7430-5(a), Proced. & Admin. Regs.
The Commissioner bears the burden of proving that his position
was substantially justified. Sec. 7430(c)(4)(B)(i); Corson v.
Commissioner, supra at 206.
Respondent concedes that petitioners substantially prevailed
with respect to the amount in controversy and the most
significant issue presented, exhausted all administrative
remedies, did not unreasonably protract the proceedings, and meet
the net worth requirements of 28 U.S.C. sec. 2412(d)(2)(B).
However, respondent contends that petitioners’ motion is
deficient on its face because it fails to allege that
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respondent’s position was not substantially justified, and
respondent contends that his position was substantially
justified. Respondent also contends that if we hold that
petitioners are entitled to litigation and administrative costs,
petitioners are not entitled to the amount claimed.
I. Whether Petitioners’ Motion Is Deficient on Its Face
We first consider respondent’s contention that petitioners’
motion is deficient on its face. Respondent directs our
attention to 28 U.S.C. sec. 2412(d)(1)(B), which provides:
A party seeking an award of fees and other expenses shall,
within thirty days of final judgment in the action, submit
to the court an application for fees and other expenses
which shows that the party is a prevailing party and is
eligible to receive an award under this subsection, and the
amount sought, including an itemized statement from any
attorney or expert witness representing or appearing in
behalf of the party stating the actual time expended and the
rate at which fees and other expenses were computed. The
party shall also allege that the position of the United
States was not substantially justified. Whether or not the
position of the United States was substantially justified
shall be determined on the basis of the record (including
the record with respect to the action or failure to act by
the agency upon which the civil action is based) which is
made in the civil action for which fees and other expenses
are sought.
Respondent contends that, because petitioners’ motion made no
allegation that respondent’s position was not substantially
justified, it is invalid on its face. We disagree.
Petitioners seek an award of litigation and administrative
costs pursuant to section 7430, which does not require taxpayers
to meet all the requirements of 28 U.S.C. section 2412. Section
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7430(c)(4)(A)(ii) requires that the moving party meet the
requirements of the first sentence of 28 U.S.C. section
2412(d)(1)(B) and the net worth limitations of 28 U.S.C. sec.
2412(d)(2)(B). The full text of section 7430(c)(4)(A) provides:
(A) In general.--The term “prevailing party” means any
party in any proceeding to which subsection (a) applies
(other than the United States or any creditor of the
taxpayer involved)--
(i) which--
(I) has substantially prevailed with respect
to the amount in controversy, or
(II) has substantially prevailed with respect
to the most significant issue or set of issues
presented, and
(ii) which meets the requirements of the 1st
sentence of section 2412(d)(1)(B) of title 28, United
States Code (as in effect on October 22, 1986) except
to the extent differing procedures are established by
rule of court and meets the requirements of section
2412(d)(2)(B) of such title 28 (as so in effect).
Nothing in section 7430 requires that the moving party satisfy
the other requirements of 28 U.S.C. sec. 2412(d)(1)(B), including
the requirement that the moving party allege that the
Government’s position was not substantially justified. Rather,
section 7430(c)(4)(B)(i) makes it clear that the Commissioner
bears the burden of proving that his position was substantially
justified.2 Corson v. Commissioner, 123 T.C. at 206.
2
Before amendment in 1996 by the Taxpayer Bill of Rights 2,
Pub. L. 104-168, sec. 701, 110 Stat. 1463, the taxpayer bore the
burden of proving that the Commissioner’s position was not
(continued...)
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The Tax Court has set forth in Rule 231(b) the required
contents of a motion for litigation and administrative costs.
Petitioners’ motion meticulously complied with those
requirements. On the basis of the foregoing, we hold that
petitioners’ motion is not deficient on its face because
petitioners failed to allege that respondent’s position was not
substantially justified.
II. Whether Respondent Has Shown That His Position Was
Substantially Justified
We next consider whether respondent has shown that his
position was substantially justified. For purposes of deciding a
motion for reasonable administrative costs, an administrative
proceeding is a procedure or action before the IRS, sec.
2
(...continued)
substantially justified. The House report accompanying the
amendment explained the purpose of shifting the burden to the IRS
as follows: “The Committee believes that it is appropriate for
the IRS to demonstrate that it was substantially justified in
maintaining its position when the taxpayer substantially
prevails”. H. Rept. 104-506, at 36 (1996), 1996-3 C.B. 49, 84.
As we noted in Fla. Country Clubs, Inc. v. Commissioner, 122 T.C.
73, 79 (2004), affd. 404 F.3d 1291 (11th Cir. 2005):
Congress amended section 7430(c)(4) in TBOR 2 to shift
to the Government the burden of establishing that its
position was substantially justified. Congress shifted the
burden by amending section 7430(c)(4)(B) to provide that a
taxpayer cannot be a prevailing party if the Government
demonstrates that its position was substantially justified.
In doing so, it eliminated any direct reference to the
“position of the United States” in section 7430(c)(4)(A).
In its current form, therefore, the language of section
7430(c)(4)(A) only requires that the taxpayer show that he
or she substantially prevailed. * * * [Fn. ref. omitted.]
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7430(c)(5), and the “position of the United States” in an
administrative proceeding refers to the position taken by the IRS
as of the earlier of (i) the date the taxpayer receives the
notice of decision of the IRS Appeals Office, or (ii) the date of
the notice of deficiency, sec. 7430(c)(7)(B); Rathbun v.
Commissioner, 125 T.C. 7, 12-13 (2005); see also sec.
301.7430-3(a), (c), Proced. & Admin. Regs. In the instant case,
the Government first took a position in the administrative
proceeding when Appeals Office issued the notice of determination
dated October 24, 2006, which petitioners received on or about
October 31, 2006. See sec. 7430(c)(7)(B)(i); Owen v.
Commissioner, T.C. Memo. 2005-115.
A court proceeding, for purposes of section 7430, means any
civil action brought in a court of the United States, including
this Court, sec. 7430(c)(6), and the “position of the United
States” in a court proceeding is the position taken by the IRS in
a judicial proceeding to which section 7430(a) applies, sec.
7430(c)(7)(A). In the instant case, respondent’s initial
litigation position is that taken in his answer to petitioner’s
petition. Sec. 7430(c)(7)(A); see Huffman v. Commissioner, 978
F.2d 1139, 1148 (9th Cir. 1992), affg. in part, revg. in part and
remanding T.C. Memo. 1991-144.
We may consider the Commissioner’s administrative and
litigation positions together if the Commissioner maintains the
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same position throughout the administrative and litigation
process. Huffman v. Commissioner, supra at 1144-1147; Maggie
Mgmt. Co. v. Commissioner, 108 T.C. at 442. In the instant case,
respondent concedes that he has maintained the same position
since issuing the initial notice of determination on October 24,
2006. Respondent’s position in that notice of determination was
that petitioners held a nominee interest in the trust property.
Accordingly, our inquiry will be limited to the question of
whether respondent has shown that that position was substantially
justified.
The Commissioner’s position is substantially justified if it
has a reasonable basis in both fact and law and is justified to a
degree that could satisfy a reasonable person. Corson v.
Commissioner, supra at 206; Maggie Mgmt. Co. v. Commissioner,
supra at 443. The reasonableness of the Commissioner’s position
is determined on the basis of the available facts that formed the
basis for the position, as well as the controlling law. Maggie
Mgmt. Co. v. Commissioner, supra at 443; DeVenney v.
Commissioner, 85 T.C. 927, 930 (1985). A position that was
reasonable when established may become unreasonable in the light
of changed circumstances. See sec. 301.7430-5(c)(2), Proced. &
Admin. Regs. A significant factor in determining whether the
Commissioner acted reasonably as of a given date is whether, on
or before that date, the taxpayer presented all relevant
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information under the taxpayer’s control. Corson v.
Commissioner, supra at 206-207; sec. 301.7430-5(c)(1), Proced. &
Admin. Regs. Respondent does not contend, and the record does
not suggest, that petitioners failed to present all relevant
evidence before the Appeals Office issued the initial notice of
determination. The record shows that no new relevant facts
emerged during the proceedings in this Court or during the
Appeals Office hearing on remand.
Respondent contends that his position was substantially
justified because it had a reasonable basis in the facts and the
law. In Dalton II, we held that the Appeals Office had abused
its discretion when it refused to consider petitioners’ offer-in-
compromise on the basis of its conclusion that petitioners had a
nominee interest in the trust property. The question of whether
an abuse of discretion has occurred requires an inquiry into
whether the discretion was exercised “without sound basis in fact
or law.” See Murphy v. Commissioner, 125 T.C. 301, 308 (2005),
affd. 469 F.3d 27 (1st Cir. 2006); Freije v. Commissioner, 125
T.C. 14, 23 (2005).
The standard we apply for purposes of deciding whether the
Commissioner’s position is substantially justified uses similar
language: “The Commissioner’s position is substantially
justified if it has a reasonable basis in both fact and law and
is justified to a degree that could satisfy a reasonable person.”
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Corson v. Commissioner, supra at 206; see also Maggie Mgmt. Co.
v. Commissioner, supra at 443. However, we are not required to
hold that the Commissioner’s position lacked substantial
justification in all cases where the Commissioner abused his
discretion. See Rowe v. Commissioner, T.C. Memo. 2002-136; Mid-
Del Therapeutic Ctr., Inc. v. Commissioner, T.C. Memo. 2000-383,
affd. 30 Fed. Appx. 889 (10th Cir. 2002); Mauerman v.
Commissioner, T.C. Memo. 1995-237. For example, we have held
that the Commissioner generally is not subject to an award of
litigation costs under section 7430 if the case is one of first
impression, even where we hold that the Commissioner abused his
discretion in the underlying case. See Rowe v. Commissioner,
supra; Mid-Del Therapeutic Ctr., Inc. v. Commissioner, supra. We
must consider the facts and circumstances of the particular case.
See Rowe v. Commissioner, supra; Mid-Del Therapeutic Ctr., Inc.
v. Commissioner, supra.
Although Dalton I was decided on the administrative record,
the parties’ constructions of the documents in that record were
different. As we noted in our opinion in Dalton I, in their
motions “the parties [appeared] to advance conflicting views with
respect to the contours of the proper record for review and which
party is attempting to exceed the bounds of the record.” In our
opinion in Dalton I we adopted a construction of the
administrative record that was closer to the construction
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advanced by petitioners. After setting forth our construction of
the administrative record, we examined the Appeals Office’s
application of law, and we concluded that the Appeals Office had
failed to apply the correct law because it did not apply State
law. Accordingly, we remanded the case to the Appeals Office,
directing it to apply Maine law to determine whether petitioners
had a nominee interest in the trust property.
However, on remand, when the Appeals Office requested an
advisory opinion from the Office of Chief Counsel, the opinion
from the Office of Chief Counsel gave only cursory treatment to
Maine law, summarily concluding that Maine law is silent with
regard to the nominee doctrine. In our Opinion in Dalton II, we
rejected respondent’s legal position, concluding that Maine law
is not undeveloped on the issue of nominee interest and that
under Maine law petitioners did not have a nominee interest in
the trust property. Dalton II, 135 T.C. at 407-415. We also
concluded that, even using the Federal factors analysis,
petitioners did not have an interest in the trust property. Id.
at 415-423. We therefore held that respondent’s Appeals Office
had abused its discretion when it concluded that petitioners did
have a nominee interest in the trust property. Id. at 423.
When we decide that the Commissioner’s Appeals Office has
abused its discretion, we are holding that its conclusion is
“without sound basis in fact or law.” See Murphy v.
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Commissioner, supra at 308; Freije v. Commissioner, supra at 23.
However, in his objection to the instant motion, respondent
contends that his position was substantially justified because it
had a reasonable basis in the facts and the law.
Respondent appears to misunderstand the standard for
“substantially justified” and our holding in Dalton II.
Respondent contends that his position was substantially justified
because it was reasonable for him to conclude that Maine law was
undeveloped. However, our holding in Dalton II went further than
simply holding that petitioners had no interest in the trust
property under Maine law; we also held that petitioners would
have no interest in the trust property even if Federal law
applied. See Dalton II, 135 T.C. at 416-423.
Moreover, in our opinions in both Dalton I and Dalton II we
disagreed with respondent’s construction of documents in the
administrative record. See id. at 394-400. In some particulars,
the Appeals Office’s findings appeared to exceed the facts that
were established by those documents. It appears that respondent
still has not accepted our construction of the administrative
record. During the hearing on remand, in his motion for summary
judgment in Dalton II, and in his opposition to petitioners’
motion now before the Court, respondent advanced proposed
findings of fact in conflict with our opinion in Dalton I. For
example, respondent continued to contend that during 1983
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petitioners exchanged lots 3 and 4 with Mr. Dalton Jr.’s father
(Mr. Dalton Sr.) for no consideration despite the fact that we
had found, in Dalton I, that Mr. Dalton Sr. assumed the mortgage
on lot 3. Respondent continued to insist that when Mrs. Dalton
Jr. cosigned a mortgage on lots 3 and 4 with Mr. Dalton Sr.
during 1993, she was treating those lots as her property, despite
the fact that we had found that she did so only at the request of
the bank because of the bank’s concern about Mr. Dalton Sr.’s
advanced age. Respondent continued to assert that because there
was no written lease evidencing a rental agreement between
petitioners and Mr. Dalton Sr., they were living on the Poland
property and treating it as their own, despite the fact that we
had found petitioners paid rent on the Poland property pursuant
to an oral agreement.
In some cases, the Appeals Office’s findings were simply
unsupported by the documents in the record. Because we were
reviewing the Appeals Office’s determination for abuse of
discretion, by disagreeing with its construction of documents in
the administrative record we were concluding that respondent’s
construction of those documents, i.e., his basis in fact, was not
reasonable.
Accordingly, we reject respondent’s contention that his
position was substantially justified because it had a reasonable
basis in the facts and the law. However, as noted above, our
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inquiry does not end here. Respondent’s position may still be
substantially justified if, examining all the facts and
circumstances, we find other facts that make his position
substantially justified. See Rowe v. Commissioner, T.C. Memo.
2002-136; Mid-Del Therapeutic Ctr., Inc. v. Commissioner, T.C.
Memo. 2000-383. However, the instant case did not involve an
issue of first impression, and we do not find any other facts or
circumstances that would make respondent’s position substantially
justified.
Accordingly, on the basis of the foregoing, we conclude that
respondent’s position was not substantially justified and that,
therefore, petitioners were the prevailing party.
III. Whether Petitioners Are Entitled to Litigation and
Administrative Costs in the Amounts Claimed
In an affidavit attached to their motion for award of
litigation and administrative costs, petitioners claim that they
are entitled to costs dating back to 1999. Respondent contends
that petitioners are not entitled to costs incurred before
October 31, 2006, the date on which petitioners received the
initial notice of determination and began to prepare their
petition for filing in this Court. We agree with respondent.
Section 7430(a) permits a taxpayer to recover reasonable
administrative costs incurred in connection with an
administrative proceeding. Pursuant to section 301.7430-3(a)(4),
Proced. & Admin. Regs., an “administrative proceeding” does not
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include proceedings in connection with collection actions; i.e.,
any action taken by the IRS to collect a tax. Sec. 301.7430-
3(b), Proced. & Admin. Regs. Because the instant case involves a
collection action, petitioners are not permitted to recover costs
incurred in connection with the collection due process hearing.
See id.; sec. 301.7430-3(d), Example (5), Proced. & Admin. Regs.
Moreover, before petitioners received the Appeals Office’s
initial notice of determination on October 31, 2006, the IRS had
not taken a position. See sec. 7430(c)(7); Fla. Country Clubs,
Inc. v. Commissioner, 122 T.C. 73 (2004), affd. 404 F.3d 1291
(11th Cir. 2005). Accordingly, we deny petitioners’ claim for
costs incurred in connection with their collection due process
hearing before the Appeals Office issued its initial notice of
determination.
Respondent contends that the fees petitioners’ attorney
charged them for reviewing the initial notice of determination
also constitute administrative costs, not litigation costs, and
that therefore those fees are subject to the limitation described
in section 301.7430-4(b)(3), Proced. & Admin. Regs. Fees
incurred before filing a petition in the Tax Court are considered
litigation costs if those fees are “incurred in connection with
the preparation and filing of a petition”. Sec. 301.7430-
4(c)(3)(i), Proced. & Admin. Regs. The regulations provide two
examples to illustrate the distinction between administrative and
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litigation costs when the taxpayer is filing a petition with this
Court:
Example (1). Taxpayer A receives a notice of proposed
deficiency (30-day letter). A files a request for and is
granted an Appeals office conference. At the conference no
agreement is reached on the tax matters at issue. The
Internal Revenue Service then issues a notice of deficiency.
Upon receiving the notice of deficiency, A discontinues A’s
administrative efforts and files a petition with the Tax
Court. A’s costs incurred in connection with the
preparation and filing of a petition with the Tax Court are
litigation costs and not reasonable administrative costs.
Furthermore, A’s costs incurred before the administrative
proceeding date (date of the notice of deficiency as set
forth in § 301.7430-3(c)(3)), are not reasonable
administrative costs.
Example (2). Assume the same facts as in Example 1
except that after A receives the notice of deficiency, A
recontacts Appeals. Again, A’s costs incurred before the
administrative proceeding date, the date of the notice of
deficiency as set forth in § 301.7430-3(c)(3), are not
reasonable administrative costs. A’s costs incurred in
recontacting and working with Appeals after the issuance of
the notice of deficiency, and up to and including the time
of filing of the petition, are reasonable administrative
costs. A’s costs incurred in connection with the filing of
a petition with the Tax Court are not reasonable
administrative costs because those costs are litigation
costs. Similarly, A’s costs incurred after the filing of
the petition are not reasonable administrative costs, as
those are litigation costs.
Sec. 301.7430-4(c)(4), Proced. & Admin. Regs. As those examples
make clear, a taxpayer begins incurring litigation costs as soon
as the taxpayer “discontinues” the taxpayer’s administrative
efforts. We must therefore decide at what time petitioners
discontinued their administrative efforts.
Petitioners never recontacted the Appeals Office after they
received the initial notice of determination. On October 31 and
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November 1, 2006, petitioners’ attorney reviewed the notice of
determination from the IRS, wrote a “file memo” for his clients,
and had a telephone conference with his clients. After that
telephone conference petitioners’ attorney began researching and
drafting the petition. Although it is unclear from the record at
exactly what time petitioners decided to discontinue their
administrative efforts and file a petition in the Tax Court, the
record shows that they had made that decision by November 1,
2006, when they had their first conversation about the issue with
their attorney. The regulations make it clear that a taxpayer
can decide to discontinue administrative efforts “Upon receiving
the notice of deficiency”; i.e., without incurring any further
administrative costs. See sec. 301.7430-4(c)(4), Example (1),
Proced. & Admin. Regs. Because petitioners never recontacted the
Appeals Office and almost immediately directed their attorney to
begin preparing a petition to file in this Court, we conclude
that petitioners began incurring litigation costs as soon as they
received the initial notice of determination. We therefore
reject respondent’s argument that some of those costs were
administrative.
IV. Whether the Attorney Fees and Other Costs That
Petitioners Seek To Recover Are Reasonable in Amount
Respondent concedes that if the Court decides that
petitioners are the prevailing party, the litigation costs they
claim beginning on November 2, 2006, are reasonable at the
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claimed rate of $150 per hour. As explained above, we also hold
that petitioners are entitled to litigation costs for fees
incurred on October 31 and November 1, 2006. However, we note
that petitioners’ attorney made several typographical or
mathematical errors when computing the proper amount of
attorney’s fees. After correcting for those errors, we hold that
petitioners are entitled to an award for litigation costs of
$45,248.11, which includes $45,015 in attorney’s fees and $233.11
in filing, printing, and mailing costs.
In reaching these holdings, we have considered all the
parties’ arguments, and, to the extent not addressed herein, we
conclude that they are moot, irrelevant, or without merit.
To reflect the foregoing,
An appropriate order and
decision will be entered.