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Court’s Memorandum Opinion in McKee v. Commissioner, T.C. Memo.
2004-115 (McKee I). In McKee I, we denied petitioners’ motion
for reasonable litigation costs because respondent’s position in
the answer was substantially justified and petitioners were not
the prevailing party. See sec. 7430(c)(4)(B)(i). In their
motion, petitioners allege that this Court “committed substantial
errors that were material to the decision in * * * [McKee I].”
This Supplemental Memorandum Opinion addresses petitioners’
allegations of error.
Background
We adopt the findings of fact in our prior Memorandum
Opinion, McKee I. For convenience and clarity, we repeat below
the facts necessary for the disposition of this motion.
In a letter to respondent dated August 9, 2002, on behalf of
petitioners, Roland Potter, C.P.A., addressed certain proposed
adjustments to petitioners’ income tax. Mr. Potter did not
enclose any documents with the letter.
In a notice of deficiency dated March 10, 2003, respondent
determined deficiencies in petitioners’ income tax for the
taxable years 1999, 2000, and 2001. After petitioners and
respondent filed with this Court a petition and an answer,
respectively, respondent held an Appeals Office conference with
petitioners’ representative. According to Appeals Officer Melvin
M. Chinen, the two main issues in the case were: (1) Whether
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