Donald C. Richardson and Rita M. Allaire - Page 10

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          meetings, pertinent documentation pertaining to the issues in               
          dispute was provided to respondent.  Subsequently, respective               
          settlements were reached.                                                   
               1.   General                                                           
               Section 7430(a) provides that the prevailing party in any              
          administrative or court proceeding may be awarded a judgment for            
          (1) reasonable administrative costs incurred in connection with             
          such administrative proceedings within the IRS, and (2)                     
          reasonable litigation costs incurred in connection with such                
          court proceedings.  Sec. 7430(a), (c).5  However, there is an               
          exception to the "prevailing party" rule if the United States               
          establishes that its position was substantially justified.  Sec.            

               5    Sec. 7430(c)(1), as applicable to these cases, provides           
          that reasonable litigation costs include reasonable fees paid or            
          incurred for the services of attorneys in connection with the               
          court proceeding, except that such fees shall not be in excess of           
          $110 per hour.  Sec. 7430(c)(2), as applicable in these cases,              
          provides that the term "reasonable administrative costs" only               
          includes "costs incurred on or after the earlier of (i) the date            
          of the receipt by the taxpayer of the notice of the decision of             
          the Internal Revenue Service Office of Appeals, or (ii) the date            
          of the notice of deficiency."                                               
               The Internal Revenue Service Restructuring & Reform Act of             
          1998 (RRA 1998), enacted July 22, 1998, amended the above-noted             
          sections.  Pub. L. 105-206, secs. 3101(a)(1), (g), 112 Stat. 685,           
          727-729.  The amendments apply to services performed or costs               
          incurred more than 180 days after the date of the enactment of              
          this Act (180 days after July 22, 1998).  RRA 1998 sec. 3101(g),            
          112 Stat. 729.  Accordingly, RRA 1998 is not applicable to the              
          instant cases.                                                              

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