Wayne C. Mason - Page 6

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                  Under section 7430(a), a judgment for litigation costs                                
            incurred in connection with a court proceeding may only be                                  
            awarded if a taxpayer: (1) Is the "prevailing party"; (2) has                               
            exhausted his or her administrative remedies within the Internal                            
            Revenue Service (IRS); and (3) did not unreasonably protract the                            
            court proceeding.  Sec. 7430(a) and (b)(1), (3).  A taxpayer must                           
            satisfy each of these three requirements in order to be entitled                            
            to a judgment under section 7430.  Rule 232(e).  Upon                                       
            satisfaction of these requirements a taxpayer may be entitled to                            
            "reasonable litigation costs".  Sec. 7430(a)(2), (c)(1).                                    
                  Respondent concedes that petitioner was the prevailing party                          
            in the court proceeding.  Respondent also concedes that                                     
            petitioner exhausted his administrative remedies within the IRS.                            
            Respondent contends, however, that petitioner unreasonably                                  
            protracted the court proceeding and that the litigation costs                               
            claimed are unreasonable.                                                                   

                  B.  Unreasonable Protraction of the Court Proceeding                                  
                  Pursuant to section 7430(b)(3), "No award for reasonable                              
            litigation * * * costs may be made * * * with respect to any                                
            portion of the * * * court proceeding during which the prevailing                           
            party has unreasonably protracted such proceeding."                                         
                  Respondent mailed petitioner a proposed settlement document                           
            on three separate occasions--the earliest on March 16, 1998.                                
            Respondent contends that petitioner unreasonably protracted the                             

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