- 15 -
supra.9 The TBOR 2 amendment to section 7430(c)(4) is consistent
with the congressional intent of immunizing the Government
against claims for costs until the IRS’s position has
crystallized in an Appeals Office decision or notice of
deficiency.
II. The Parties’ Arguments
Respondent maintains that since no Appeals Office decision
or notice of deficiency was ever issued to petitioners,
petitioners do not qualify as “prevailing parties” for purposes
of section 7430(c)(4) and cannot recover administrative costs.10
In response, petitioners assert that respondent did take a
“position”. Respondent’s position was manifested in: (1) The
9 Sec. 7430(c)(7) serves to protect the IRS from liability
before the Appeals Office gets involved. The Appeals Office is
the forum for the compromise of disputes between taxpayers and
the IRS, and it is the first stage within the IRS at which the
proposed adjustments are fully reviewed and which expressly takes
into account the hazards of litigation.
10 We disagree with respondent that Estate of Gillespie v.
Commissioner, 103 T.C. 395 (1994), and Belshee v. Commissioner,
T.C. Memo. 1999-380, establish that petitioners are not entitled
to recover costs prior to the issuance of a notice of deficiency
or an Appeals Office decision. These cases denied the taxpayers’
requests to recover costs on the grounds that such costs were not
incurred during a period for which recovery was permitted under
sec. 7430(c)(2). These cases did not address whether the
taxpayers were prevailing parties under subsec. (c)(4).
Furthermore, these cases were decided on the basis of sec.
7430(c)(2) before it was amended by RRA 1998 to allow taxpayers
to recover costs incurred on or after the date of mailing of the
first letter of proposed deficiency. Because we interpret sec.
7430(c)(2) in light of its amendment by RRA 1998, the logic of
Estate of Gillespie and Belshee is not dispositive of whether
petitioners are entitled to recover administrative costs.
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011