Haas & Associates Accountancy Corporation - Page 11




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               Of the total $44,559 in litigation fees and costs for which            
          petitioners seek recovery, petitioners calculate that $39,648 was           
          incurred after petitioners made their qualified offer.                      

                                       OPINION                                        
               Under the general provisions of section 7430, based on the             
          contention that respondent’s position was not substantially                 
          justified, petitioners seek recovery of the $44,559 in litigation           
          costs they incurred after respondent’s July 17, 1998, notices of            
          deficiency were mailed to them.  Alternatively, based on their              
          May 5, 1999, qualified offer, petitioners seek recovery of the              
          $39,648 in litigation costs incurred after petitioners made their           
          qualified offer.  We have not previously considered the qualified           
          offer rule of section 7430(c)(4)(E) and (g).3                               

          3    Sec. 7430(c)(4)(E) and (g), provides in part as follows:               
               SEC. 7430.  AWARDING OF COSTS AND CERTAIN FEES.                        
                    (c) Definitions.--For purposes of this section--                  
               *        *        *        *        *        *        *                
                         (4) Prevailing party.                                        
               *        *        *        *        *        *        *                
                              (E) Special rules where judgment less than              
                         taxpayer’s offer.                                            
                                   (i) In general.--A party to a court                
                              proceeding meeting the requirements of                  
                              subparagraph (A)(ii) shall be treated as the            
                              prevailing party if the liability of the                
                                                              (continued...)          





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