Thomas J. Mitchell and Janice M. Mitchell - Page 2




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                  Arthur G. Jaros, Jr., for petitioners.                                               
                  William I. Miller, for respondent.                                                   


                                        MEMORANDUM OPINION                                             

                  LARO, Judge:  Petitioners move the Court under section 7430                          
            for an award of $12,296 in litigation costs.  Respondent objects                           
            thereto and has filed with the Court a memorandum (respondent’s                            
            memorandum) in support of his objection.  We must decide whether                           
            respondent’s positions in this proceeding were substantially                               
            justified.  We hold they were not to the extent discussed herein                           
            and award petitioners $1,844 of litigation costs.  Unless                                  
            otherwise indicated, section references are to the Internal                                
            Revenue Code in effect for the relevant years, Rule references                             
            are to the Tax Court Rules of Practice and Procedure, and dollar                           
            amounts are rounded.  References to petitioner are to Thomas J.                            
            Mitchell.                                                                                  
                                             Background                                                
                  While residing in Lockport, Illinois, petitioners petitioned                         
            the Court to redetermine respondent’s determination that they                              
            were liable for Federal income tax deficiencies of $13,517 for                             
            1994 and $14,407 for 1995 and accuracy-related penalties of                                
            $2,703 for 1994 and $2,881 for 1995 for substantial                                        
            understatement of income tax.  Respondent’s determination was                              






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