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Discussion
Section 7430 provides for the award of litigation costs
incurred in connection with a court proceeding brought against
the United States involving the determination of any tax,
interest, or penalty pursuant to the Internal Revenue Code. An
award of litigation costs may be made where the taxpayer (1) is
the “prevailing party”, (2) exhausted available administrative
remedies, (3) did not unreasonably protract the judicial
proceeding, and (4) claimed reasonable litigation costs. Sec.
7430(a), (b)(1), (3), and (c). These requirements are
conjunctive, and petitioner has the burden of establishing that
all of these requirements have been satisfied. See Rule 232(e);
Minahan v. Commissioner, 88 T.C. 492, 496-497 (1987).
For the reasons stated below, we find it unnecessary to
address whether the position of the respondent was substantially
justified in this matter, whether petitioner unreasonably
protracted the proceedings, or whether the costs claimed are
reasonable.
Petitioner Must Pay or Incur Fees and Costs
A party’s award for litigation costs is limited to the costs
that the party actually paid or incurred. Sec. 7430(a)(2),
(c)(1)(B)(iii); Foothill Ranch Co. Pship. v. Commissioner, 110
T.C. 94, 101 (1998)(holding that a partner may receive an award
for litigation costs only to the extent such fees paid by the
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Last modified: May 25, 2011