Frederick M. and Cheryl A. Prouty - Page 6

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          report business income of $1,160, he also had failed to claim               
          certain business expenses.  They requested that the Appeals                 
          officer allow additional time for them to gather substantiation             
          for the unclaimed expenses.  On September 21, 2001, petitioners             
          faxed to the Appeals officer a copy of a Schedule C for Mr.                 
          Prouty that reported the previously unreported nonemployee                  
          compensation of $1,160 and also unclaimed expenses of $720.                 
               Respondent having conceded petitioner's TV executive                   
          expenses of $7,904 as of March 20, 2001, petitioners conceded the           
          other adjustments in the notice of deficiency, and respondent               
          additionally agreed to the Schedule C expenses for Mr. Prouty of            
          $720.  A Stipulation of Settlement was filed by Order of the                
          Court dated February 13, 2002.                                              
          Requirements Under Section 74302                                            
               Under section 7430(a), a judgment for costs incurred in an             
          administrative proceeding in connection with the determination of           
          any tax may be awarded only if a taxpayer:  (1) Is the                      
          "prevailing party"; and (2) did not unreasonably protract the               
          administrative proceeding.  See sec. 7430(a) and (b)(3).                    
               A taxpayer must satisfy each of the respective requirements            
          in order to be entitled to an award of administrative costs under           

               2We apply sec. 7430 as amended by Congress in the IRS                  
          Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3101,           
          112 Stat. 727-730.                                                          

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