After concessions by the parties,2 the sole issue for
decision is whether respondent has established that respondent's
position was substantially justified in the administrative and
court proceedings. We hold that respondent has not.
Neither party requested an evidentiary hearing, and the
Court concludes that such a hearing is not necessary for the
proper disposition of petitioner's motion. See Rule 232(a)(2).
We therefore decide the matter before us based on the record that
has been developed to date.
Background
Petitioner is a California corporation owned 51 percent by
Pizza Park Corporation, an S corporation, (Pizza Park) and 49
percent by Michael Brown (Mr. Brown). Pizza Park is wholly owned
issue. However, all references to sec. 7430 are to such section
in effect at the time that the petition was filed. All Rule
references are to the Tax Court Rules of Practice and Procedure.
2 Respondent concedes: (1) Petitioner exhausted its
administrative remedies, see sec. 7430(b)(1); (2) petitioner did
not unreasonably protract the proceedings, see sec. 7430(b)(3);
(3) petitioner substantially prevailed, see sec.
7430(c)(4)(A)(i); and (4) petitioner satisfied the applicable net
worth requirement, see sec. 7430(c)(4)(A)(ii).
Initially, there was an issue as to the reasonableness of
the claimed costs. However, petitioner has substantiated the
expenses contested by respondent and has conceded that attorney's
fees are recoverable only to the extent of $110 per hour (plus
any allowable increases for the cost of living). See sec.
7430(c)(1)(B)(iii), (c)(2)(B). Because of petitioner's
concession regarding the rate of recovery for attorney's fees,
the claimed costs have been reduced from $12,005 to $9,477 (13.3
hours for 1997 at the rate of $110 per hour and 63.8 hours for
1998 at the rate of $120 per hour (cost of living adjusted) plus
$358 in expenses). Respondent does not contest the
reasonableness of the $9,477 amount.
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