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(1) reasonable administrative costs incurred in
connection with such administrative proceeding within
the Internal Revenue Service, and
(2) reasonable litigation costs incurred in
connection with such court proceeding.
(b) Limitations.--
(1) Requirement that administrative remedies be
exhausted.--A judgment for reasonable litigation costs
shall not be awarded under subsection (a) in any court
proceeding unless the court determines that the
prevailing party has exhausted the administrative
remedies available to such party within the Internal
Revenue Service. Any failure to agree to an extension
of the time for the assessment of any tax shall not be
taken into account for purposes of determining whether
the prevailing party meets the requirements of the
preceding sentence.
* * * * * * *
(c) Definitions.--For purposes of this section--
* * * * * * *
(4) Prevailing party.--
(A) In general.--The term “prevailing party”
means any party in any proceeding to which
subsection (a) applies * * *--
(i) which--
(I) has substantially prevailed
with respect to the amount in
controversy, or
(II) has substantially prevailed
with respect to the most significant
issue or set of issues presented, and
* * * * * * *
(B) Exception if United States establishes
that its position was substantially justified.--
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