Talmadge and Reatha Swanagan - Page 5

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               We may grant petitioners’ motion if they meet all of the               
          statutory requirements for an award of litigation costs.  See               
          sec. 7430(b) and (c); see also Rule 232(e); Dixson Intl. Serv.              
          Corp. v. Commissioner, 94 T.C. 708, 714, 715 (1990); Minahan v.             
          Commissioner, 88 T.C. 492, 497 (1987).  The parties dispute the             
          four requirements noted above.                                              
               We focus on the first of those requirements; namely, that a            
          taxpayer must exhaust administrative remedies available within              
          the Internal Revenue Service before petitioning this Court with             
          respect to the underlying year.  See sec. 7430(b)(1).  We                   
          conclude that petitioners have not met this requirement.                    
          Petitioners never requested a conference with Appeals as to                 
          either 1994 or 1995, although such a conference was available.              
          Section 301.7430-1(b)(1), Proced. & Admin. Regs., provides that,            
          where a conference with Appeals is available, administrative                
          remedies are exhausted only when the taxpayer (1) participated in           
          a conference with Appeals before petitioning this Court, or (2)             
          requested such a conference (as applicable herein, by filing a              
          written protest with respondent) and had its request denied.                
               We hold that petitioners do not qualify for an award of                
          litigation costs under section 7430.  Cf. Patel v. Commissioner,            
          T.C. Memo. 1998-306; Jacoby v. Commissioner, T.C. Memo. 1997-384;           
          Burke v. Commissioner, T.C. Memo. 1997-127.  In so holding, we              

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