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in which the Government is defined as having taken a position
under section 7430(c)(7)). The RRA 1998 amendment, therefore,
expanded the definition of “reasonable administrative costs” to
include costs incurred from an earlier date. While the RRA 1998
amendment moves the point in time in which administrative costs
come within section 7430(c)(2), the RRA 1998 amendment does not
move the point in time in which the Government is considered to
have taken a position in section 7430(c)(7). Accordingly, the
RRA 1998 amendment does not permit recovery of administrative
costs in situations where no notice of deficiency or Appeals
Office decision has been issued.
Our interpretation of the RRA 1998 amendment to section
7430(c)(2) is consistent with section 7430(c)(4). First,
paragraphs (4) and (2) of subsection (c) serve different
functions in the statutory scheme governing the recovery of
administrative costs. Section 7430(c)(4) governs the
determination of whether a taxpayer is a prevailing party
entitled to recover administrative costs. Section 7430(c)(2), on
the other hand, defines what costs are recoverable by a taxpayer
who otherwise qualifies as a prevailing party under section
7430(c)(4). Stated simply, if a taxpayer does not qualify as a
prevailing party (e.g., because the Government never took a
“position” under 7430(c)(7) by issuing a notice of deficiency or
Appeals Office decision), he or she cannot recover any
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