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SUPPLEMENTAL OPINION
SWIFT, Judge: This matter is before us on petitioners’
motion for partial summary judgment as to the applicability of
the qualified offer provision of section 7430(c)(4)(E).
Petitioners seek a recovery of litigation costs relating to a
Federal income tax deficiency adjustment determined by respondent
with respect to income to be charged to petitioners on
termination of water rights (water rights adjustment).
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue.
Under the qualified offer provision of section
7430(c)(4)(E), petitioners seek to obtain an award of litigation
costs that they incurred after May 12, 1999, the date on which
petitioners made a qualified offer to respondent to settle the
water rights adjustment.1
Relying on the “settlement limitation” set forth in section
7430(c)(4)(E)(ii)(I), respondent argues that the ultimate
1 At this point, it is not clear whether petitioners also (or
in the alternative) will be seeking the recovery of litigation
costs relating to the water rights adjustment under the general
litigation cost recovery provisions of sec. 7430. In any event,
petitioners acknowledge that, under the qualified offer provision
of sec. 7430(c)(4)(E), they are entitled to recover only
litigation costs incurred after May 12, 1999, the date on which
petitioners made their qualified offer to respondent. The
parties suggest that once the issue raised in the instant motion
is resolved, they likely will be able to settle other aspects of
petitioners’ motion for litigation costs.
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Last modified: May 25, 2011