- 17 -
Additionally, in such situations, respondent’s position in the
proceeding will likely be reasonable or justified so as to
preclude the recovery of administrative or litigation costs.
The purpose or goal of Appeals has been generally described
in the following global statement of the Appeals mission:
The Appeals mission is to resolve tax controversies,
without litigation, on a basis which is fair and
impartial to both the Government and the taxpayer and
in a manner that will enhance voluntary compliance and
public confidence in the integrity and efficiency of
the Service. * * *
4 Administration, Internal Revenue Manual (CCH), sec. 8.1.3.2, at
27,037.11
In this context, we consider the facts in the case before
us. The parties’ positions and the information available to them
in this case continued to develop throughout the administrative
process and until trial. Petitioners were examined concerning
whether the $130,000 payment they received was paid to settle
claims for punitive damages. Petitioners, through their
11 The same perspective is shared by legal commentators, as
reflected in following commentary about the Appeals process:
The Service encourages taxpayers who disagree with
actions by district offices, such as adjustments in
their tax liability, to resolve their disagreements
through administrative appeal. The use of negotiation
and settlement, rather than court litigation, is
intended to minimize expenditures of time and money by
the government and taxpayers alike. * * *
Saltzman, IRS Practice and Procedure, par. 9.01, at 2 (2d ed.
1991).
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