Donald C. Richardson and Rita M. Allaire - Page 4

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          (1) a deficiency in income tax due from petitioners in the amount           
          of $2,358; (2) a penalty due from petitioners in the amount of              
          $472 as provided under section 6662(a); (3) a deficiency in                 
          income tax due from PCCL in the amount of $698 (without taking              
          into consideration a tentative net operating loss carryback                 
          allowance of $1,214 from 1996); and (4) a penalty due from PCCL             
          in the amount of $140 as provided under section 6662(a).  No                
          penalty was due from petitioners or PCCL for fraud as provided              
          under section 6663.                                                         
               Petitioners and PCCL each filed a motion for an award of               
          reasonable litigation and administrative costs.  Respondent filed           
          an objection to each motion.  Petitioners and PCCL filed a reply            
          to respondent's objections.  Each party submitted memoranda in              
          support of their respective positions.  None of the parties have            
          requested a hearing in this matter.  We conclude that a hearing             
          is not necessary to decide this motion.  Rule 232(a)(2).                    
               The issues for decision are:  (1) Whether respondent's                 
          position in the underlying proceedings was substantially                    
          justified; and (2) whether the amount of costs claimed by                   
          petitioners and PCCL with regard to the litigation and                      
          administration costs is reasonable.                                         
          Background                                                                  
               The following facts are based on the entire record,                    
          including the affidavits and exhibits submitted by the parties              
          and the parties' pleadings.                                                 



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