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III. Amount of Recoverable Costs
A. The “Special Factor” Issue
Section 7430(c)(1)(B)(iii) provides that attorney’s fees
recoverable under section 7430 shall not exceed $125 per hour
(adjusted annually for inflation) “unless the court determines
that a special factor, such as the limited availability of
qualified attorneys for such proceeding, the difficulty of the
issues presented in the case, or the local availability of tax
expertise, justifies a higher rate.” Petitioner argues that the
circumstances of this case warrant the determination of
recoverable costs without regard to the statutory rate cap.9
Specifically, petitioner argues that respondent’s disparate
treatment of petitioner and her ex-husband with regard to the
fraud penalty, as evidenced by the Appeals officer’s June 2,
1999, settlement offer, should qualify as a “special factor” in
that such action necessitated the retention of separate counsel,
effectively precluding her from sharing the cost of her defense
with her ex-husband.
In Estate of Cervin v. Commissioner, 200 F.3d 351, 355-358
(5th Cir. 2000), affg. T.C. Memo. 1998-176, the Court of Appeals
for the Fifth Circuit rejected the taxpayer’s contention that the
9 Petitioner raised the “special factor” argument for the
first time in her reply to respondent’s objection to the motion.
Because we reject the substance of petitioner’s argument, we do
not address the procedural ramifications, if any, of petitioner’s
failure to raise the “special factor” issue in the motion.
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