- 3 - this investment, and, thus, petitioners were entitled to loss and investment interest expense deductions claimed on their 1985 and 1986 Federal income tax returns. Discussion A taxpayer who substantially prevails in an administrative or court proceeding may be awarded a judgment for reasonable costs incurred in such proceedings. Sec. 7430(a)(1) and (2). A judgment may be awarded under section 7430 if a taxpayer (1) is the "prevailing party", (2) exhausted the administrative remedies available to the taxpayer within the Internal Revenue Service (IRS),3 and (3) did not unreasonably protract the proceedings. Sec. 7430(a) and (b)(1), (4). A taxpayer must satisfy each of these three requirements to be entitled to a judgment under section 7430. Respondent concedes that petitioners exhausted the administrative remedies available and did not unreasonably protract the proceedings. Therefore, the Court is left to decide whether petitioners were the prevailing party. To qualify as the "prevailing party", the taxpayer must establish that (1) the position of the United States in the proceeding was not substantially justified,4 (2) the taxpayer 3 This requirement does not apply to an award for reasonable administrative costs. Sec. 7430(b)(1). 4 In relevant part, the Taxpayer Bill of Rights 2 (TBOR 2), Pub. L. 104-168, secs. 701-704, 110 Stat. 1452, 1463-1464 (1996), amended sec. 7430 to place on the Commissioner the burden of (continued...)Page: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
Last modified: May 25, 2011