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Discussion
Section 7430 provides for the award of reasonable
administrative and litigation costs to a taxpayer in an
administrative or court proceeding brought against the United
States involving the determination of any tax, interest, or
penalty pursuant to the Internal Revenue Code. An award of
administrative or litigation costs may be made where the
taxpayer: (1) Is the “prevailing party”; (2) exhausted available
administrative remedies;3 and (3) did not unreasonably protract
the administrative or judicial proceeding. See sec. 7430(a),
(b)(1), (3). The costs claimed must also be reasonable in
amount. See sec. 7430(c). These requirements are conjunctive,
and failure to satisfy any one will preclude an award of costs to
petitioners. See Minahan v. Commissioner, 88 T.C. 492, 497
(1987).
To be a “prevailing party”, the taxpayer must show that (1)
the taxpayer substantially prevailed with respect to the amount
in controversy or with respect to the most significant issue(s)
presented, and (2) the taxpayer satisfied the net worth
requirement. See sec. 7430(c)(4)(A). If respondent establishes
that the position of the United States in the proceeding was
3 This requirement does not apply to an award for
reasonable administrative costs. See sec. 7430(b)(1).
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Last modified: May 25, 2011