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3. Conclusion
We hold that respondent’s administrative and litigation
position was not reasonable under the circumstances and that,
therefore, it was not substantially justified. Because
respondent’s position was not substantially justified, we
conclude that petitioner was the prevailing party as defined by
section 7430(c)(4)(A).
B. Whether Costs Claimed by Petitioner Are Reasonable
1. Amount of Costs Claimed
Section 7430 permits a taxpayer to recover both reasonable
administrative costs14 and reasonable litigation costs15. The
amount of reasonable attorney’s fees that we may award is limited
13(...continued)
determinative, in deciding whether respondent’s position was
substantially justified. Maggie Mgmt. Co. v. Commissioner, 108
T.C. 430 (1997); Powers v. Commissioner, 100 T.C. 457, 471 (1993)
affd. in part, revd. in part, and remanded in part 43 F.3d 172
(5th Cir. 1995).
14Sec. 7430(c)(2) and (3) defines reasonable administrative
costs to include, in relevant part, any administrative fees or
charges imposed by the Internal Revenue Service and fees for the
services of an attorney (attorney’s fees), incurred on or after
the earliest of: (1) The date the taxpayer receives the Appeals
Office notice of decision, (2) the date of the notice of
deficiency, or (3) the date on which the first letter of proposed
deficiency allowing the taxpayer an opportunity for
administrative review with the Appeals Office is sent. Sec.
7430(c)(2).
15Litigation costs are those costs incurred in connection
with a court proceeding. Sec. 7430(a)(2), (c)(1). Reasonable
litigation costs include, among other things, court costs and
fees paid or incurred for the services of attorneys. Sec.
7430(c)(1).
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