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litigation costs, the regulations exceed the statutory
requirements of section 7430(b)(1). Clearly, the regulations do
not impose any such absolute condition, and we have not so held.
In 1998, Congress provided under the qualified offer rule of
sections 7430(c)(4)(E) and (g) that a taxpayer may be deemed to
qualify as a prevailing party under section 7430(a) and (c)(4)
regardless of whether the taxpayer substantially prevailed in the
proceeding or of whether the position of respondent in the
proceeding was substantially justified. Internal Revenue Service
Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-206,
sec. 3101(e)(1) and (2), 112 Stat. 728.5
The qualified offer provisions apparently arose not from any
concern with the exhaustion-of-administrative-remedies
requirement but with the frequent controversy over whether a
party qualifies as a prevailing party under section
7430(c)(4)(A). E.g., Corkrey v. Commissioner, 115 T.C. 366, 372-
373 (2000); McIntosh v. Commissioner, T.C. Memo. 2001-144; Gibson
v. Commissioner, T.C. Memo. 2001-74; Nguyen v. Commissioner, T.C.
Memo. 2001-41; Livingston v. Commissioner, T.C. Memo. 2000-387
(each of which involves the “no substantial justification”
5 The qualified offer rules of sec. 7430(c)(4)(E) and (g) were
made effective for costs incurred after Jan. 22, 1999, 180 days
after July 22, 1998. Internal Revenue Service Restructuring and
Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3101(g),
112 Stat. 729. Respondent does not contend that any of the
litigation costs for which petitioners herein seek recovery were
incurred before the Jan. 22, 1999, effective date of the
qualified offer rule.
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