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whether respondent’s position in the underlying proceeding was
substantially justified. We hold that it was. Thus, we hold
that petitioner is not entitled to an award for litigation costs.
Unless otherwise specified, section references are to the
Internal Revenue Code as amended. Rule references are to the Tax
Court Rules of Practice and Procedure.
Background
Petitioner resided in Florida when he filed his petition.
A. Petitioner’s Lottery Winnings and The Divorce Proceedings
In April 1992, petitioner won $7 million in the Florida
lottery, payable to him in 20 annual installments of $350,000.
Petitioner’s wife filed for divorce before petitioner
received the fourth lottery payment (due on May 15, 1995). At
the request of petitioner’s wife, the Circuit Court of the
Eleventh Judicial District of Dade County, Florida, Family
Division, ordered that the May 15, 1995, payment be placed in
escrow pending an agreement between petitioner and his wife or a
court order regarding disposition of the payment.
On November 2, 1995, petitioner and his wife agreed to a
marital settlement and equitable division of property. Under
that agreement, $3,000 of the funds in the escrow account was
paid to petitioner’s wife’s attorney for expert fees, and the
balance was divided equally between petitioner and his wife.
Petitioner and his wife agreed that petitioner would receive
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