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Regs. The books or records required shall be kept at all times
available for inspection by authorized internal revenue officers
or employees. Sec. 1.6001-1(e), Income Tax Regs. Thus,
respondent was not required to maintain records on petitioners’
behalf.
Furthermore, even if respondent did have prior years’
records indicating that the distributions were nontaxable, each
taxable year stands on its own, and the Commissioner may
challenge in a succeeding year what was overlooked in previous
years. See Rose v. Commissioner, 55 T.C. 28, 31-32 (1970); Hahn
v. Commissioner, T.C. Memo. 2007-75. Accordingly, respondent was
not required to accept information reported on previous years’
tax returns and Forms 5498. We therefore conclude that
respondent’s position in the administrative proceeding was
substantially justified.
B. The Court Proceeding
Costs incurred in connection with the filing of a petition
and costs incurred thereafter are considered litigation costs.
McGowan v. Commissioner, T.C. Memo. 2005-80; sec.
301.7430-4(c)(3) and (4), Example 2, Proced. & Admin. Regs.
Because petitioners dealt with the Office of Appeals after the
petition was filed, any costs relating to such activity are
litigation costs rather than administrative costs. See Goertler
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Last modified: November 10, 2007