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adjustment under section 7430. Accordingly, we will follow our
holding in Bayer, and we find October 1, 1981, to be the
applicable date from which to make the adjustment.
1. Amount of Litigation Costs
Petitioners seek an award of litigation fees and expenses in
the total amount of $140,580.46. Petitioners have also asked
that they be awarded any additional costs incurred since March 1,
1994, to recover such fees and expenses. However, as explained
in the affidavit of petitioners' counsel filed as a supplement to
motion for litigation costs:
with counsel's acquiescence, Petitioners have paid to
date only $56,588 of the fees incurred on their behalf.
As a result of Baker & McKenzie's advisery role with
regard to the DISC Issue, Petitioners agreed after
Respondent fully conceded the case to pay only $40,000
of the unbilled fees incurred from December 1992 on
their behalf. The $40,000 amount was paid by the
Swansons from their Joint checking account. H.& S.
Swansons' Tool Co., Mr. Swanson's closely held
corporation and the client of record for bookkeeping
purposes, had previously paid $16,588 for services
rendered on petitioners' behalf between September and
November, 1992.
Petitioners agreed to allow Baker & McKenzie to recover
any remaining unbilled fees in excess of the $56,588
Petitioners have paid to date to the extent that
Petitioners prevail on * * * [their Motion for
Reasonable Litigation Costs.] [Emphasis added.]
Thus, beyond the $40,000 agreed to, there is no legal obligation
of petitioners to pay fees incurred on their behalf in the
judicial proceeding.28 Furthermore, based on the agreement
28
We find that to the extent of the $16,588 paid by Swansons'
Tool, petitioners did not "pay or incur" fees within the meaning
of sec. 7430. Although the nature of the agreement under which
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