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determination, collection, or refund of any tax, interest, or
penalty under the Internal Revenue Code.
Litigation costs may be awarded only if the taxpayers
satisfy all of the requirements set forth in section 7430.
Goettee v. Commissioner, 124 T.C. 286, 289 (2005). The taxpayers
must establish that they: (1) Are the prevailing party, (2) have
exhausted available administrative remedies, (3) have not
unreasonably protracted the court proceedings, and (4) have
claimed litigation costs that are reasonable. Sec. 7430(a) and
(b)(1), (3).
To be a prevailing party, the taxpayer must substantially
prevail with respect to either the amount in controversy or the
most significant issue or set of issues presented and must
satisfy the applicable net worth requirements under 28 U.S.C.
section 2412(d)(2)(B) (2000). Sec. 7430(c)(4)(A). Even if the
taxpayer satisfies all of the stated requirements, the taxpayer
shall not be treated as a prevailing party if the Commissioner’s
position in the court proceeding was substantially justified.
Sec. 7430(c)(4)(B). The Commissioner has the burden of proving
that his position was substantially justified. See sec.
7430(c)(4)(B)(i); Rule 232(e).
Subject to certain limitations, under section 7430(c)(4)(E),
a party shall be treated as the prevailing party if “the
liability of the taxpayer pursuant to the judgment in the
proceeding (determined without regard to interest) is equal to or
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