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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
justified.
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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