Angela Matthews - Page 8

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            respective petitions to this Court, petitioners alleged that                              
            respondent's determinations would be refuted by the facts they                            
            would present at trial.  Petitioners did not present any evidence                         
            with respect to income or deductions.  In fact, petitioners                               
            conceded the adjustments at trial.  While respondent alludes to                           
            frivolous arguments made by petitioners, the record does not                              
            reflect any frivolous or groundless arguments made by petitioners                         
            prior to their representation by Mr. Ray.  Nor is this Court                              
            convinced that the petitions were filed primarily for delay.                              
            Therefore, in the exercise of our discretion, we decline to                               
            impose penalties pursuant to section 6673(a)(1) against                                   

                        primarily for delay,                                                          
                              (B) the taxpayer's position in such                                     
                        proceeding is frivolous or groundless, or                                     
                              (C) the taxpayer unreasonably failed to                                 
                        pursue available administrative remedies,                                     
                  the Tax Court, in its decision, may require the                                     
                  taxpayer to pay to the United States a penalty not in                               
                  excess of $25,000.                                                                  
                        (2) Counsel's liability for excessive costs.--                                
                  Whenever it appears to the Tax Court that any attorney                              
                  or other person admitted to practice before the Tax                                 
                  Court has multiplied the proceedings in any case                                    
                  unreasonably and vexatiously, the Tax Court may                                     
                              (A) that such attorney or other person                                  
                        pay personally the excess costs, expenses,                                    
                        and attorneys' fees reasonably incurred                                       
                        because of such conduct, * * *                                                

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