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was disallowed in full. Respondent’s notice stated in pertinent
part:
We have completed our review of your claim for
administrative costs under Section 7430 of the Internal
Revenue Code. We have fully disallowed your claim
because pursuant to Reg. Sec. 301.7430-3(a)(4),
proceedings in connection with collection actions are
not administration proceedings for the purposes of IRC
Section 7430.
Petitioners filed a timely petition for administrative costs
with the Court pursuant to section 7430(f)(2). In response,
respondent filed a motion to dismiss for failure to state a claim
upon which relief can be granted. Relying on section 301.7430-
3(a)(4), Proced. & Admin. Regs., respondent initially argued that
the collection action underlying petitioners’ claim for
administrative costs is not considered an administrative
proceeding within the meaning of section 7430.2
Petitioners filed a response to respondent’s motion to
dismiss in which they assert that section 301.7430-3(a)(4),
2 Sec. 301.7430-3(a)(4), Proced. & Admin. Regs., provides
in pertinent part:
(a) Administrative proceeding. For purposes of section
7430, an administrative proceeding generally means any
procedure or other action before the Internal Revenue
Service that is commenced after November 10, 1988.
However, an administrative proceeding does not include–
* * * * * * *
(4) Proceedings in connection with collection
actions (as defined in paragraph (b) of this section),
including proceedings under sections 7432 or 7433.
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