-15-
fact that there was authority at the time of filing does not mean
the taxpayer was correct."
As support for its argument that its position was
substantially justified, respondent relies on J.P. Sheahan
Associates, Inc. v. Commissioner, T.C. Memo. 1992-239, a case
that was decided several years after petitioner filed its return
for taxable year 1989.
Respondent's understanding of when substantial authority is
determined is incorrect because petitioner is entitled to rely on
the law that existed at the time its return was filed. See sec.
1.6661-3(b)(4)(iii), Income Tax Regs.
We conclude that respondent's position with regard to the
section 6661 issue was not substantially justified.
Issue 2. Reasonable Costs
Petitioner seeks recovery of litigation fees and costs that
it incurred after its petition was filed. Petitioner seeks
recovery of only the fees and costs related to the section 6661
issue and for its motion for litigation costs. In Huffman v.
Commissioner, 978 F.2d at 1149, the Court of Appeals for
the Ninth Circuit, the Court of Appeals to which an
appeal in this case lies, stated that "So long as the
government's position justifies recovery of fees, any reasonable
fees to recover such fees are recoverable." Thus, the fees
incurred by petitioner for its motion for reasonable attorney's
fees are recoverable. We must decide whether the number of hours
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011