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OPINION
Section 7430(a)(1) provides that a party that has prevailed
in any administrative proceeding against the United States may
recover reasonable administrative costs. Section 7430(c)(2)
limits the term "reasonable administrative costs" to include only
costs incurred on or after the earlier of (i) the date of the
receipt by the taxpayer of the notice of the decision of the
Internal Revenue Service Office of Appeals, or (ii) the date of
the notice of deficiency. Estate of Gillespie v. Commissioner,
103 T.C. 395, 396 (1994).
To obtain an award of administrative costs, taxpayers must
establish that: (1) They have "substantially prevailed" in the
controversy; (2) they satisfy certain net worth requirements; (3)
the position of the United States in the proceeding was not
substantially justified; (4) they have not unreasonably
protracted the proceedings; and (5) the amount of the costs
sought is reasonable. Sec. 7430(b) and (c). Petitioners must
prove that they satisfy each of these requirements. Rule 232(e);
Gantner v. Commissioner, 92 T.C. 192, 197 (1989), affd. 905 F.2d
241 (8th Cir. 1990).12 The parties have stipulated that
12In the Taxpayer Bill of Rights 2, Pub. L. 104-168, sec.
701(b), 110 Stat. 1452, 1463 (1996), sec. 7430(c)(4) was amended
to require the Government to establish that its position was
substantially justified. This amendment is effective for
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Last modified: May 25, 2011