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In general, section 7430(a) allows a taxpayer who is a
prevailing party in a civil tax proceeding to recover reasonable
administrative and litigation costs incurred in such proceeding.
A taxpayer bears the burden of proving that he or she is entitled
to the claimed costs. Rule 232(e); Rutana v. Commissioner, 88
T.C. 1329, 1332 (1987). To achieve this end, petitioners must
demonstrate (1) that they have exhausted the administrative
remedies available to them within the Internal Revenue Service
(IRS), section 7430(b)(1); (2) that they are the prevailing
party, section 7430(a); and (3) that they did not unreasonably
protract the proceedings, section 7430(b)(4).
A prevailing party is one who (1) establishes that
respondent's position was not substantially justified; (2)
substantially prevailed with respect to the amount in
controversy, or with respect to the most significant issue or set
of issues presented; and (3) has a net worth which does not
exceed $2 million at the time the civil tax proceeding commences.
Sec. 7430(c)(4).
Respondent agrees that the moving parties have substantially
prevailed, that they meet the net worth requirements, and that
the moving parties exhausted available administrative remedies.
Respondent does not agree that her position was not substantially
justified. Respondent agrees that petitioners did not
unreasonably protract the Court proceeding, but contends that
they did unreasonably protract the administrative proceeding by
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Last modified: May 25, 2011