Francesca Cappucci - Page 4

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          proceeding with the Internal Revenue Service (IRS).  Under                  
          section 301.7430-2(b), Proced. & Admin. Regs., there are several            
          requirements that a taxpayer must meet in order to be entitled to           
          administrative costs.  Respondent agrees that petitioner met all            
          but one of those requirements.  In particular, respondent                   
          contends that not all of the costs sought by petitioner were                
          incurred on or after the administrative proceeding date as                  
          defined in section 301.7430-3(c), Proced. & Admin. Regs.                    
               Under section 7430(c)(2) and section 301.7430-3(c), Proced.            
          & Admin. Regs., the “administrative proceeding date” is defined             
          to be the earlier of (1) the date of the receipt by the taxpayer            
          of the notice of decision of the IRS Office of Appeals, or (2)              
          the date of the notice of deficiency.                                       
               Congress, in the Internal Revenue Service Restructuring and            
          Reform Act of 1998, Pub. L. 105-206, sec. 3101, 112 Stat. 727,              
          amended section 7430 in a manner which would have permitted                 
          petitioner to claim additional administrative costs.  Those                 
          amendments, however, apply to costs that were incurred more than            
          180 days after July 22, 1998.  Unfortunately, the costs claimed             
          by petitioner were all incurred prior to October 15, 1998.                  
               Petitioner has explained that, from the very beginning in              
          1994, respondent’s examiner’s contacts with petitioner, her                 
          business associates, and others made the examination a “painful,            

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