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this case on the substantive issues was issued on September 19,
1996, as T.C. Memo. 1996-426.
Section 7430(a) provides that the prevailing party may be
awarded a judgment for (1) reasonable administrative costs
incurred in connection with an administrative proceeding within
the Internal Revenue Service, and (2) reasonable litigation costs
incurred in connection with a court proceeding. Congress enacted
section 7430 in the Tax Equity and Fiscal Responsibility Act of
1982, Pub. L. 97-248, sec. 292(a), 96 Stat. 572, and, as relevant
to the present case, amended the statute by the Technical and
Miscellaneous Revenue Act of 1988, Pub. L. 100-647, sec. 6239(a),
102 Stat. 3342, 3743-3747, applicable to proceedings commenced
after November 10, 1988.2
A judgment for costs may be awarded under section 7430(a)
only if, among other requirements, a taxpayer (1) is the
"prevailing party", and (2) where the taxpayer seeks litigation
costs, has exhausted the administrative remedies available to the
taxpayer within the Internal Revenue Service, and (3) does not
unreasonably protract the proceedings. Sec. 7430(a), (b)(1),
(4).
2 Sec. 7430 was amended most recently by the Taxpayer Bill
of Rights 2, Pub. L. 104-168, secs. 701-704, 110 Stat. 1452,
1463-1464, applicable to proceedings commenced after July 30,
1996. However, the parties do not dispute that sec. 7430 as
amended by the Technical and Miscellaneous Revenue Act of 1988,
Pub. L. 100-647, sec. 6239(a), 102 Stat. 3342, 3743-3747, is
applicable.
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