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adjustments with respect to which respondent applied the fraud
penalty. As stated, we have found that respondent was
substantially justified in applying the fraud penalty to his
adjustment of the initial, but not the amended, 1991 return.
Based on the relative amounts of those adjustments ($487,591 and
$46,790, respectively), we allocate 91 percent, or $8,235, of the
$9,049 amount to respondent’s adjustment of the initial 1991
return. Petitioner is therefore entitled to recover $22,969 of
the fraud defense amount ($31,204 ! $8,235).
2. Attorney’s Fees Relating to the Motion
For purposes of section 7430, reasonable litigation costs
may include reasonable fees incurred in connection with the
section 7430 proceeding itself, see Powers v. Commissioner, 100
T.C. 457, 492 (1993), affd. in part and revd. in part on another
issue 43 F.3d 172 (5th Cir. 1995), regardless of the
reasonableness of the Commissioner’s position in the section 7430
proceeding. Bayer v. Commissioner, T.C. Memo. 1991-282 at n.5
(citing Commissioner, I.N.S. v. Jean, 496 U.S. 154, 158-166
(1990). Based on our review of the attorney time entries
submitted by petitioner and the application of the statutory rate
caps, we find that petitioner incurred $8,575 of potentially
recoverable attorney’s fees in prosecuting the motion ([20 x
$140] + [38.5 x $150]). We further conclude that petitioner is
entitled to recover such fees in proportion to her recovery of
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