Galedrige Construction, Inc. - Page 2

          and Rule 231, filed June 24, 1997, and petitioner's amended                 
          motion, filed September 2, 1997.2  Petitioner's motion is for               
          only the reasonable litigation costs it expended on the issue of            
          whether it was liable for the addition to tax pursuant to section           
          6661 (the section 6661 issue) in Galedrige Construction, Inc. v.            
          Commissioner, T.C. Memo. 1997-240 (Galedrige I).                            
               The issues for decision are:  (1) Whether respondent's                 
          determination of the section 6661 addition to tax for substantial           
          understatement of tax was substantially justified within the                
          meaning of section 7430(c)(4) and the regulations thereunder.  We           
          hold it was not.  (2) Whether the amount of litigation costs                
          claimed by petitioner is reasonable within the meaning of section           
          7430(c)(1).  We hold it is.                                                 

          recently by the Taxpayer Bill of Rights 2, Pub. L. 104-168, sec.            
          701, 110 Stat. 1452, 1463-1464 (1996), effective with respect to            
          proceedings commenced after July 30, 1996.  The amendments to the           
          section shift to the Commissioner the burden of proving that the            
          position of the United States was substantially justified, sec.             
          7430(c)(4)(B), and changed the hourly rate for attorney's fees to           
          $110, sec. 7430(c)(1)(B)(iii).                                              
               A judicial proceeding is commenced in this Court with the              
          filing of a petition.  Rule 20(a); Maggie Management Co. v.                 
          Commissioner, 108 T.C. 430 (1997).  Petitioners filed their                 
          petition on Nov. 21, 1994; thus the 1996 amendments do not apply            

               2  All section references are to the Internal Revenue Code             
          in effect for the years in issue, and   all Rule references are             
          to the Tax Court Rules of Practice and Procedure, unless                    
          otherwise indicated.  All dollar amounts are rounded to the                 
          nearest dollar, unless otherwise indicated.                                 

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