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or penalty. Litigation costs may be awarded pursuant to section
7430 if (1) the taxpayer has exhausted administrative remedies,
(2) the taxpayer has not unreasonably protracted the court
proceedings, (3) the taxpayer is the prevailing party, and (4)
the claimed litigation costs are reasonable. Sec. 7430(a),
(b)(1), (3), (c)(4). Respondent concedes that petitioner
exhausted all administrative remedies and did not unreasonably
protract the court proceedings. We must decide whether
petitioner is the prevailing party and whether the amount of
petitioner’s claimed litigation costs is reasonable.
Prevailing Party
To qualify as the prevailing party pursuant to section
7430(c)(4)(A), the taxpayer must substantially prevail with
respect to either the amount in controversy or the most
significant issue or set of issues presented, and the taxpayer
must satisfy the net worth requirement of section
7430(c)(4)(A)(ii).2 Respondent concedes that petitioner
substantially prevailed with respect to the amount in controversy
and the most significant issue presented and that petitioner
satisfies the net worth requirement.
2Sec. 7430(c)(4)(A)(ii), as relevant here, effectively
limits the award of litigation costs to individuals with a net
worth of $2 million or less. Stieha v. Commissioner, 89 T.C.
784, 789-790 (1987).
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