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Administrative and litigation costs may be awarded if the
taxpayer (1) is the prevailing party, (2) exhausted available
administrative remedies, (3) did not unreasonably protract the
court proceedings, and (4) claimed reasonable litigation costs.
Sec. 7430(a), (b)(1), (b)(3), (c)(1). The requirements of
section 7430 are conjunctive, and failure to satisfy any one of
the requirements precludes an award of costs. Goettee v.
Commissioner, 124 T.C. 286, 289 (2005), affd. 192 Fed. Appx. 212
(4th Cir. 2006). Furthermore, section 7430 is a waiver of
sovereign immunity and must be strictly construed in the
Government’s favor. Estate of Cervin v. Commissioner, 200 F.3d
351, 355 (5th Cir. 2000), affg. T.C. Memo. 1998-176; Simpson v.
Commissioner, T.C. Memo. 1995-194.
To be the 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. Sec.
7430(c)(4)(A)(i). In addition, the taxpayer must meet certain
net worth requirements. Sec. 7430(c)(4)(A)(ii). The taxpayer
will not be treated as the prevailing party, however, if the
Commissioner establishes that the Commissioner’s position was
substantially justified. Sec. 7430(c)(4)(B); see also Pierce v.
Underwood, 487 U.S. 552, 565 (1988).
Respondent concedes that petitioners exhausted all
administrative remedies, did not unreasonably protract the court
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Last modified: November 10, 2007