D. Sherman and Maxine M. Cox - Page 3

                                          3                                           
               Section 7430, as amended by the Technical and Miscellaneous            
          Revenue Act of 1988, Pub. L. 100-647, sec. 6239, 102 Stat. 3342,            
          3743-3746 (applicable to proceedings commenced after November 10,           
          1988), provides that in any court proceeding brought by or                  
          against the United States, the "prevailing party" may be awarded            
          reasonable litigation costs.  To be a prevailing party,                     
          petitioners must establish:  (1) That the position of the United            
          States in the proceeding was not substantially justified; (2)               
          that they substantially prevailed with respect to the amount in             
          controversy or with respect to the most significant issue                   
          presented; and (3) that they met the net worth requirements of 28           
          U.S.C. section 2412(d)(2)(B)(1994) on the date the petition was             
          filed.  Sec. 7430(c)(4)(A).  In addition to being the prevailing            
          party, petitioners must establish that they exhausted the                   
          administrative remedies available to them within the Internal               
          Revenue Service (IRS), that they did not unreasonably protract              
          the proceeding, and that the costs claimed are reasonable.  Sec.            
          7430(b)(1), (4), (c).  Petitioners must establish all of the                
          above elements in order to recover.  See Minahan v. Commissioner,           
          88 T.C. 492, 497 (1987); Prager v. Commissioner, T.C. Memo.                 
          1994-420.                                                                   
               For purposes of petitioners' motion, respondent concedes               
          that petitioners have exhausted their administrative remedies as            
          required by section 7430(b)(1) and have satisfied the net worth             
          requirement of section 7430(c)(4)(A)(iii).  Respondent further              
          concedes that petitioners have not unreasonably protracted these            





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