- 17 - section 7430.12 Accordingly, we first reduce petitioners’ claim by $2,281.25 (18.25 hours multiplied by the recovery rate of $125 per hour claimed by petitioners), leaving potentially recoverable costs in the amount of $8,697.49. B. Allocation of Costs Between the Two Issues Petitioners have not allocated their costs between the discharge of indebtedness issue and the penalty issue, nor would we expect them to, given the interrelatedness of the two issues. We therefore allocate petitioners’ remaining eligible costs between the two issues based on the relative dollar amounts involved. See, e.g., Galedrige Constr., Inc. v. Commissioner, T.C. Memo. 1997-485 (25 percent of costs allocated to issue regarding 25 percent substantial understatement penalty).13 12 Sec. 3101(b) of the Internal Revenue Service Restructuring and Reform Act of 1998 (1998 Act), Pub. L. 105-206, 112 Stat. 728, pushed back the “start date” for recoverable administrative costs in a deficiency proceeding from the date of the notice of deficiency to the earlier date of the Commissioner’s “30-day letter.” That amendment applies to costs incurred after Jan. 18, 1999, the date that is 180 days after the date of enactment of the 1998 Act. 1998 Act sec. 3101(g), 112 Stat. 729. 13 Because petitioners did not separately address the reasonableness of respondent’s position with respect to the discharge of indebtedness issue and the penalty issue, respectively, we do not think it appropriate to allocate petitioners’ costs between those issues on a pro rata basis (i.e., 50 percent to each issue). Cf. Heasley v. Commissioner, T.C. Memo. 1991-189, affd. in part and revd. in part 967 F.2d 116 (5th Cir. 1992) (taxpayers challenged the reasonableness of the Commissioner’s position with respect to four separate penalties; award of costs proportionate to number of issues on which (continued...)Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
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