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Discussion
In general, section 74301 allows a taxpayer who is a
prevailing party in an administrative or court proceeding brought
against the United States in connection with the determination,
collection, or refund of any tax to recover reasonable
administrative and litigation costs incurred in such proceeding.
Sec. 7430(a). A judgment for litigation costs incurred in
connection with a court proceeding may be awarded only if a
taxpayer: (1) Is the prevailing party; (2) exhausted available
administrative remedies; and (3) did not unreasonably protract
the court proceeding. Sec. 7430(a), (b)(1), (3), (c)(4).
Similarly, a judgment for administrative costs incurred in
connection with an administrative proceeding may be awarded only
if a taxpayer: (1) Is the prevailing party; and (2) did not
unreasonably protract the administrative proceeding. Sec.
7430(a), (b)(3), (c)(4).
A taxpayer qualifies as a prevailing party only if: (1) The
taxpayer substantially prevailed with respect to either the
amount in controversy or the most significant issue or set of
issues presented; (2) the taxpayer satisfies the applicable net
1 We apply sec. 7430 as amended by Congress in the Internal
Revenue Service Restructuring and Reform Act of 1998 (RRA 1998),
Pub. L. 105-206, sec. 3101, 112 Stat. 685, 727. The amendments
made by RRA 1998 to sec. 7430 apply to costs incurred or services
performed after Jan. 18, 1999. Since petitioner’s counsel
neither incurred costs nor performed services for petitioner
until June 1999, the RRA 1998 amendments clearly apply to this
case.
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Last modified: May 25, 2011