Talmadge and Reatha Swanagan - Page 4

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          1995, respondent determined that petitioner was liable for a                
          $14,089 deficiency and a $2,817.80 accuracy-related penalty under           
          section 6662(a).                                                            
               Petitioners retained Ms. Zatopa on or about April 5, 1999,             
          to serve as their representative as to the subject years.  Two              
          months later, petitioners and Ms. Zatopa signed an agreement in             
          which petitioners agreed to pay Ms. Zatopa $50 an hour in                   
          connection with this proceeding.  The agreement also provided:              
          “If Attorney [Ms. Zatopa] is successful in overturning parts or             
          all of the Commissioner’s decisions, Attorney will seek to                  
          recover attorney’s fees, if and where permitted under the                   
          Internal Revenue Code, at the rate of $110 per hour from the                
          Internal Revenue Service.”                                                  
               On June 15, 1999, Ms. Zatopa petitioned the Court on behalf            
          of petitioners to redetermine the determinations reflected in the           
          notices of deficiency.  Respondent transferred the case to                  
          Appeals approximately 2 months later, and Appeals settled the               
          case with petitioners after receiving from them additional                  
          information.  Respondent conceded all items for 1994 and all but            
          a $777 deficiency for 1995.                                                 
               Petitioner paid Ms. Zatopa $1,325 (26.5 hours times $50 an             
          hour) for her work on this case.                                            

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