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costs requested are reasonable, sec. 7430(c)(1)(B)(iii).
Petitioner argues, among other things, that respondent acted
unreasonably and that respondent’s refusal to acknowledge Dragna
as petitioner’s representative prevented petitioner from
establishing the deductibility of the $17,862 claimed farming
loss and prevented petitioner from raising, prior to the week of
the scheduled trial, his argument as to the nontaxable nature of
the $20,075 erroneously reported as income on the 1988 return.
Based on the above arguments, petitioner argues that respondent’s
position was not substantially justified and that his motion for
an award of $5,000 in administrative and litigation costs under
section 7430 should be granted.
Respondent argues that, in light of petitioner’s failure to
raise until one week before the scheduled trial the nontaxable
nature of the reported income, her position herein, during the
administrative proceedings and up to the time of settlement, was
substantially justified. Respondent notes that the deductibility
of the $17,862 claimed farming loss has never been established by
petitioner, that it was not allowed in the settlement, and that
petitioner obviously does not qualify as a prevailing party with
regard thereto. Respondent notes further that petitioner never
established Dragna's authority to represent petitioner although
respondent gave petitioner and Dragna every opportunity to do so.
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