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determination, requiring petitioners to change from the cash
method to the accrual method, was arbitrary, capricious, or
without sound basis in fact or law. In so doing, we relied
heavily on Osteopathic Med. Oncology & Hematology, P.C.
Petitioners thereafter filed their motion seeking to recover
litigation costs.
Discussion
In general, section 74303 provides for the award of
reasonable litigation costs to a taxpayer who: (1) Is the
prevailing party in a court proceeding brought against the United
States involving the determination of any tax, interest or
penalty pursuant to the Internal Revenue Code; (2) has exhausted
his or her administrative remedies within the IRS; and (3) did
not unreasonably delay or protract the court proceedings.
Respondent concedes that petitioners exhausted their
administrative remedies and that they did not unreasonably delay
or protract these proceedings.
To be a prevailing party, a taxpayer must satisfy the
applicable net worth requirement and must substantially prevail
3Sec. 7430 as most recently amended by Congress in the IRS
Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3101,
112 Stat. 685, 727, applies to that portion of the claimed costs
incurred after Jan. 18, 1999. Sec. 7430 as amended by the
Taxpayer Relief Act of 1997, Pub. L. 105-34, secs. 1285, 1453,
111 Stat. 788, 1038, 1055, applies to that portion of the claimed
costs incurred on or before Jan. 18, 1999.
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