Thomas J. Mitchell and Janice M. Mitchell - Page 1

                                       T.C. Memo. 2000-145                                             

                                     UNITED STATES TAX COURT                                           

                THOMAS J. MITCHELL AND JANICE M. MITCHELL, Petitioners v.                              
                        COMMISSIONER OF INTERNAL REVENUE, Respondent                                   

                  Docket No.  14056-98.                  Filed April 21, 2000.                         

                        Ps move the Court for litigation costs under sec.                              
                  7430, I.R.C.  R had determined a deficiency in Ps’ 1994                              
                  and 1995 Federal income taxes and accuracy-related                                   
                  penalties with respect thereto.  R’s determination was                               
                  primarily attributable to an unclear application of a                                
                  recent statutory amendment.  We rejected R’s                                         
                  application of that amendment and held that Ps were not                              
                  liable for the resulting deficiencies or accuracy-                                   
                  related penalties.  Held: R’s position as to the                                     
                  deficiencies was substantially justified; hence, Ps are                              
                  not entitled to an award of litigation costs with                                    
                  respect thereto.  Held, further, R’s position as to the                              
                  accuracy-related penalties was not substantially                                     
                  justified; hence, we shall award litigation costs to Ps                              
                  to the extent that their claimed costs are attributable                              
                  to the accuracy-related penalties issue.                                             

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