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Discussion
A taxpayer who substantially prevails in an
administrative or court proceeding may be awarded reasonable
costs incurred in those proceedings. Sec. 7430(a). In order
to determine that the taxpayer was a "prevailing party", it
must be shown that: (1) The position of the United States in
the proceeding was not substantially justified,2 (2) the
taxpayer substantially prevailed with respect to either the
amount in controversy or the most significant issue or issues
presented, and (3) the taxpayer met the net worth requirements
of 28 U.S.C. sec. 2412(d)(2)(B) (1994), on the date the
petition was filed. Sec. 7430(c)(4)(A). The taxpayer must
also show that all administrative remedies have been exhausted
(to obtain a judgment for litigation costs), section
7430(b)(1), that the taxpayer has not unreasonably protracted
the administrative or judicial proceedings, section
7430(b)(4), redesignated as (b)(3) by the 1996 Act, and that
the costs claimed are reasonable in amount, section 7430(c)(1)
and (2). These requirements are in the conjunctive and each
must be met in order for the Court to determine that
administrative or litigation costs should be awarded pursuant
2 Because the petition was filed after July 30, 1996, the
burden is on respondent to show that the Government's position
was substantially justified. Taxpayer Bill of Rights 2, Pub. L.
104-168, secs. 701-704, 110 Stat. 1452, 1463-1464 (1996). See
Maggie Management Co. v. Commissioner, 108 T.C. 430 (1997). Our
holding, however, does not depend on which party has the burden.
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Last modified: May 25, 2011