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or penalty under the Internal Revenue Code. An award of
reasonable administrative or litigation costs may be made where
the taxpayer is the prevailing party and did not unreasonably
protract the administrative or judicial proceedings. See sec.
7430(a) and (b)(3). Litigation costs may be awarded only if the
taxpayer exhausted available administrative remedies. See sec.
7430(b)(1).
To be a prevailing party, a taxpayer must: (1)
Substantially prevail with respect to either the amount in
controversy or the most significant issue or set of issues
presented, and (2) meet certain net worth requirements. See sec.
7430(c)(4)(A)(i) and (ii).
Respondent concedes that petitioner substantially prevailed
and meets the net worth requirements. Respondent argues,
however, that petitioner is not the prevailing party because
respondent was substantially justified in maintaining his
position in the administrative and judicial proceedings.
Respondent also argues that petitioner did not exhaust all
administrative remedies, that petitioner unreasonably protracted
the proceedings, and that the fees requested are unreasonable.
As a general rule, the taxpayer in an administrative or
court proceeding is not treated as the prevailing party if
respondent establishes that the position of the United States was
substantially justified. See sec. 7430(c)(4)(B)(i). Pursuant to
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Last modified: May 25, 2011