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OPINION
We consider here, on remand from the Court of Appeals for
the Ninth Circuit, whether petitioners meet the requirements of
section 7430 so as to be entitled to recover a portion of their
litigation costs. In an earlier opinion, Allen v. Commissioner,
T.C. Memo. 1999-118, we held that respondent’s position in the
proceeding was substantially justified. Under our holding,
petitioners were not entitled to administrative or litigation
costs, and, accordingly, there was no need to decide whether the
remaining section 7430 requisites for recovery had been met. The
Court of Appeals for the Ninth Circuit reversed our holding to
the extent that the Court of Appeals held that respondent’s
position in the proceeding ceased to be substantially justified
beginning 3 days before the trial. The parties have resolved all
but one of the requirements necessary for the recovery of
litigation costs.8
The question that remains in dispute is whether petitioners
exhausted their administrative remedies within the Internal
8 Sec. 7430(b) and (c) provides that prevailing parties, to
recover litigation costs, must establish that: (1) They
exhausted available administrative remedies; (2) they
substantially prevailed in the controversy; (3) the position of
the United States in the proceeding was not substantially
justified; (4) they meet certain net worth requirements; (5) they
did not unreasonably protract the proceeding; and (6) the amount
of costs is reasonable. Failure to meet any of the requirements
will defeat some part or all of a taxpayer’s recovery of
litigation costs.
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Last modified: May 25, 2011