Gary C. and Maru E. Johansen - Page 7

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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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