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than the fraud issue (i.e., issues with respect to which
petitioner did not challenge the reasonableness of respondent’s
position). Further, in light of our finding that respondent’s
assertion of the fraud penalty was substantially justified in
part, petitioner is not entitled to recover all of the fees that
we allocate to the fraud issue.
a. Allocation of Fees to the Fraud Issue
We have reviewed the attorney time entries submitted by
petitioner’s counsel and have divided the entries relating to the
underlying dispute into three categories: (1) entries pertaining
solely to the fraud issue (55.6 hours), (2) entries pertaining
solely to nonfraud issues (14.35 hours), and (3) all other
entries relating to the underlying dispute (202.8 hours). Based
on the statutory rate caps applied by petitioner,11 the amount of
potentially recoverable attorney’s fees attributable to the
entries in those three categories is $7,784 (55.6 x $140), $1,997
([1.25 x $130] + [13.1 x $140]), and $28,217 ([17.5 x $130] +
[185.3 x $140]), respectively, for a total of $37,998.12 We
allocate the $28,217 of residual (category 3) fees between the
11 The statutory rate cap for fees incurred by petitioner
in 1999 is $130. Rev. Proc. 98-61, 1998-2 C.B. 811, 816. The
rate cap for fees incurred in 2000 and 2001 is $140. Rev. Proc.
99-42, 1999-2 C.B. 568, 572; Rev. Proc. 2001-13, 2001-1 C.B. 337,
341. The rate cap for fees incurred in 2002 is $150. Rev. Proc.
2001-59, 2001-2 C.B. 623, 628.
12 For convenience, we round all monetary calculations to
the nearest dollar.
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