Jerry and Patricia A. Dixon, et al. - Page 17

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          I.   Introduction                                                           
               A.   Overview of Section 7430                                          
               Section 7430 provides that, subject to certain conditions, a           
          taxpayer who prevails against the Government in any Federal tax             
          proceeding (administrative or judicial) may recover reasonable              
          costs, including attorney’s fees, paid or incurred in connection            
          with such proceeding if the Government’s position in the                    
          proceeding was not substantially justified.  Sec. 7430(a),                  
          (c)(1)(B)(iii), (c)(4)(A) and (B).  In its report accompanying              
          the bill in which section 7430 originated, the House Committee on           
          Ways and Means contemplated that such fee awards “will enable               
          individual taxpayers to vindicate their rights regardless of                
          their economic circumstances.”  H. Rept. 97-404, at 11 (1981).              
               A taxpayer seeking litigation costs under section 7430 must            
          have exhausted all available administrative remedies prior to               
          litigation, must not have unreasonably protracted the                       
          proceedings, and, if an individual, must not have had a net worth           
          in excess of $2 million as of the filing date of the suit.  Sec.            
          7430(b)(1), (b)(3), (c)(4)(A)(ii); see 28 U.S.C. sec.                       
          2412(d)(2)(B)(i) (1988) (individual net worth limitation                    

          (EAJA fee application included legal assistant fees; no                     
          discussion of the issue).  Although legal assistant and paralegal           
          fees do not fit neatly within the category of either “attorney’s            
          fees” or “expenses”, we follow petitioners’ lead in grouping them           
          with attorney’s fees.                                                       

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