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provided: (1) Petitioners' 1994 income tax liability is $31,374;
(2) the deficiency to be paid by petitioners is $27,824; and (3)
petitioners are not liable for the accuracy-related penalty under
section 6662(a). On March 24, 1998, petitioners filed their
motion for award of reasonable litigation and administrative
costs in the amount of $2,763.
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). A judgment
may be awarded under section 7430 if a taxpayer (1) was the
prevailing party; (2) exhausted the administrative remedies
available to the taxpayer within the Internal Revenue Service;2
and (3) did not unreasonably protract the proceedings. Sec.
7430(b). These requirements are in the conjunctive; each must be
met in order for the Court to consider awarding litigation or
administrative costs under section 7430. Minahan v.
Commissioner, 88 T.C. 492, 497 (1987); Renner v. Commissioner,
T.C. Memo. 1994-372.
To be a "prevailing party" a taxpayer must establish the
following: (1) The taxpayer substantially prevailed with respect
to either the amount in controversy or with respect to the most
significant issue presented; and (2) the taxpayer met the net
2 This requirement applies only to an award of litigation
costs. Sec. 7430(b)(1).
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