Gary C. and Maru E. Johansen - Page 8

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          less than the liability of the taxpayer which would have been so            
          determined if the United States had accepted a qualified offer of           
          the party under subsection (g).”  Sec. 7430(g).  The qualified              
          offer provision of section 7430(c)(4)(E) applies without regard             
          to whether the Commissioner’s position in the proceeding is                 
          substantially justified.  See Haas & Associates Accountancy Corp.           
          v. Commissioner, 117 T.C. 48, 59 (2001), affd. 55 Fed. Appx. 476            
          (9th Cir. 2003); McGowan v. Commissioner, T.C. Memo. 2005-80.               
               The issues in this case are:  (1) Whether petitioners                  
          exhausted their available administrative remedies, (2) whether              
          the qualified offer provision applies, and (3) whether                      
          respondent’s position in the court proceeding was substantially             
          Exhaustion of Available Administrative Remedies                             
               Section 7430(b)(1) requires that taxpayers take advantage of           
          all available administrative remedies to be eligible for an award           
          of litigation costs.  Haas & Associates Accountancy Corp. v.                
          Commissioner, supra at 57.                                                  
               Section 301.7430-1(b)(1), Proced. & Admin. Regs., provides:            
               A party has not exhausted the administrative remedies                  
               available within the Internal Revenue Service with                     
               respect to any tax matter for which an Appeals office                  
               conference is available under ��601.105 and 601.106 of                 
               this chapter (other than a tax matter described in                     
               paragraph (c) of this section) unless–-                                
                    (i)  The party, prior to filing a petition in the                 
               Tax Court * * * participates * * * in an Appeals office                
               conference; or                                                         

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