Michael O'Keefe Sowell - Page 6

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          judgment may be awarded under section 7430 if a taxpayer (1) was            
          the “prevailing party”, (2) exhausted the administrative remedies           
          available to the taxpayer within the Internal Revenue Service,4             
          and (3) did not unreasonably protract the proceedings.  Sec.                
          7430(a) and (b)(1), (3).  Respondent’s position is that                     
          petitioner is not a “prevailing party”, failed to exhaust his               
          administrative remedies, and unreasonably protracted the                    
               For a taxpayer to qualify as the “prevailing party”, it must           
          be established that (1) the position of the United States in the            
          proceeding was not substantially justified, (2) the taxpayer has            
          substantially prevailed with respect to the amount in controversy           
          or with respect to the most significant issue or set of issues              
          presented, and (3) the taxpayer satisfied the applicable net                
          worth requirements.  Sec. 7430(c)(4)(A).  Respondent concedes the           
          second and third of these criteria.  Respondent argues, however,            
          that the position taken by the United States against petitioner             
          was substantially justified.  Rule 232(e); Dixson Intl. Service             
          Corp. v. Commissioner, 94 T.C. 708, 714-715 (1990); Gantner v.              
          Commissioner, 92 T.C. 192, 193 (1989), affd. 905 F.2d 241 (8th              
          Cir. 1990).                                                                 

          4    This requirement does not apply to an award for reasonable             
          administrative costs.  Sec. 7430(b)(1).                                     

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