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Discussion
Section 7430(a) provides that the prevailing party may be
awarded a judgment for (1) reasonable administrative costs
incurred in connection with an administrative proceeding within
the Internal Revenue Service, and (2) reasonable litigation costs
incurred in connection with a court proceeding. Congress enacted
section 7430 in the Tax Equity and Fiscal Responsibility Act of
1982, Pub. L. 97-248, sec. 292(a), 96 Stat. 572, and, as relevant
to the present case, amended it by the Technical and
Miscellaneous Revenue Act of 1988 (TAMRA), Pub. L. 100-647, sec.
6239(a), 102 Stat. 3342, 3743-3747, applicable to proceedings
commenced after November 10, 1988.9 Because both the
administrative proceeding and the court proceeding in this case
were commenced after November 10, 1988, and before July 31, 1996,
we apply section 7430 as amended by TAMRA.
A judgment for costs may only be awarded under section
7430(a) if a taxpayer (1) is the "prevailing party", (2) where
the taxpayer seeks litigation costs, has exhausted the
administrative remedies available to the taxpayer within the
Internal Revenue Service, and (3) does not unreasonably protract
the proceedings. Sec. 7430(a), (b)(1), (4).
9 Sec. 7430 was amended most recently by the Taxpayer Bill
of Rights 2, Pub. L. 104-168, secs. 701-704, 110 Stat. 1452,
1463-1464, applicable to proceedings commenced after July 30,
1996.
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