T.C. Mem o. 2 01 4- 75 UNITED STAT ES TAX COURT MARIE GAYLE SAMUELSON CARPENTIER, Pet it io ne r v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt *

Doc ke t No . 14 71 8- 12 . Fi le d Ap ril 29 , 20 14 . Caro li ne Tso Ch en , forpe ti ti on er. Sara h E. Sex to n, fo r res po nd en t.

SUPPLEMENTAL MEMORANDUM OPINI ON GERBER, Jud ge : We con si de r he re p et it io ne r’s m ot io n p ur su an t t o R ul e 23 1 fo r anawardof r eas on ab le adm in is tra ti ve an d l it ig at io n c os ts an d fe es un de r 1 Thi s o pi ni onsupp le m en ts ou r pr io r op in io n, Ca rp en ti er v . Comm is si on er, * T.C. Mem o. 2 01 3- 16 0. Unl es s o th erwi se in di cat ed , Rul e ref eren ces are t o the Tax C ou rt Rul es of 1 Prac ti ce an d P ro cedur e, an d a ll sec ti on refe ren ces are t o the Int ern al Rev enue (co nt in ue d...)- 2 -

[* 2] se ct io n 7 43 0. Th e p rimary is su e is whethe r un de r se ct io n 7 43 0 p et it io ne r can reco ve r certa in adm in is tra ti ve an d l it ig at io n c os ts an d fe es in cu rredinco nn ect io n with thi s i nt eres t ab at em en t p ro ceed in g o r ot he r su chco st s an d fe es in cu rredin co nn ect io n wi th pe ti ti on er’s n ow- cl os ed20 04 de fic ie nc y pro ceed in gs . Bac kg ro un d InAug us t 2 00 6 re sp on de ntsel ect edth e 2 00 4 re tu rnof p et it io ne r an d h er hu sb an d J ackCarp en ti er fo r ex am in at io n. Th e Car pe nt ie rs att en de d a n i ni ti al m eet in g wi th th e ex am in in g a ge nt . The rap po rt b etweenth e Car pe nt ie rs an d the ag en t qui ck ly det eri or at ed . Inth e m on th s fo ll owi ng th e in it ia l m eet in g, the ag en t m ad e co nt in ua l reque st s fo r ad di ti on al in fo rm at io n, an d b y Octo be r 20 06 th e Car

pe nt ie rs were di ss at is fie d wi th th e ag en t’s ap pr oa chan d s ke pt ic al of h is in te nt io ns . They reque st edth ata di ffer en t ag en t b e as si gn edto th e ex am in at io n o f th ei r 20 04 return, b utno res po ns e fro m res po nd en t was forth co m in g. Du rin g No ve m be r 20 06 th e Car

pe nt ie rs co nt in ue d t o re cei ve ad di ti on al reque st s fo r in fo rm at io n fr om th e ag en t. InNov em

be r 20 06 Mr. Car

pe nt ie r was ho sp it al iz ed , andbe cau se of h is

(...co nt inue d) 1 Co de ineffe ctat a ll rel ev an t t im es . All a m ou nt s ar e ro un de d t o the ne ares t d ol lar.- 3 -

[* 3] cri ti cal co nd it io n the y reque st edad di ti on al ti m e to pro vi de th e in fo rm at io n; ho wev er, the ir r eque stwas d en ie d. The Carp en ti ers th enco nt act edth e Tax pa y er Advo cat e Servi ce o ffi ce. Afte r th atth ey

di d n othe ar fro m

th e ag en t, an d a ga inth ey reque st edan d wer e de ni eda reas si gn m en t o f th ei r ex am in at io n t o a no th er ag en t. At thi s p oi ntth e Carp en ti ers reque st edth atth e ag en t cl os e th e ex am in at io n a ndall ow the m to pr oc eedto App eal s, b utth e ag en t re fu se d. Th e d el ay co nt in ue d fo r ab ou t o ne y ear, an d o n Dec em

be r 22 , 20 07 , Mr. Car

pe nt ie r ha d astro ke an d d ie d i n the ho sp it al . Pet it io ne r m ad e ad di ti on al reque st s fo r a n ew ex am in er i n e arl y 20 08 , whi ch were al so de ni ed . After t ha t p et it io ne r hi redtax pro fes si on al s t o a dd res s an y is su es rem ai ni ng on th e 2 00 4 re tu rnan d t o p rep are a n am en de d 2 00 4 re tu rn . The ag en t advi se d p et it io ne r th atan y am en de d re tu rnha d t o b e p ro ces se d thr ou gh hi m . Bec au se of t he de te rio rat edrel at io ns hi p wi th th e ag en t an d b ecau se he ha d or ig in al ly rejectedpe ti ti on er’s at te m ptto fil e anam en de d re tu rn , pet it io ne r fi le d th e am en de d re turnwith the Fres no , Cal ifo rn ia , Int ern al Rev enue Serv ic e Cen te r, whe re h er o rig in al 20 04 return h adbe enfil ed . The Fre sn o S erv ic e Cen te r se ntth e am en de d re tu rnto th e ag en t.- 4 -

[* 4] Dur in g Dec em

be r 20 09 res po nd en t i ss ue d t o p et it io ne r a n ot ic e o f de fic ie nc y

for20 04 . Peti ti on er fi le d ape ti ti on with thi s C ou rt a t d oc ke t No . 43 74 -0 9S . Res po nd en t d et erm in eda $2 6,8 24 in co m e ta x d efi ci en cy an d an accu racy-rela te d p en al ty of $5 ,36 5. Pe ti ti on er p ai d the in co m e ta x d efi ci en cy bu t co nt es te d the accu racy-rela te d p en al ty. Early in 2 01 0 p et it io ne r m etwith a n App eal s o ffi cer. A se tt le m en t o f th e rem ai ni ng is su e was reac he d, an d the Co urt en te redth e p art ie s’ st ip ul at edde ci si on on Feb ru ary 26 , 20 10 . The reaf te r pe ti ti on er re qu es te d tha t re sp on de ntab at e th e in te res t o n the 20 04 in co m e ta x d efi ci en cy . Res po nd en t d en ie d h er re qu es t, an d p et it io ne r as ke d res po nd en t’s Ap pe al s Off ic e to rev ie w th e d en ia l. Ap pe al s s us ta in edth e d en ia l. InJu ne 20 12 pe ti ti on er fi le d ape ti ti on ch al le ng in g re sp on de nt ’s de te rm in at io n. Re sp on de nton th e ev e o f tr ia l co nc ed edth atpe ti ti on er i s en ti tl ed to anab at em en t o f in te res t o n the 20 04 de fic ie nc y . On Ju ly 1, 20 13 , th e rem ai ni ng is su es rai se d i n the pe ti ti on were d eci de d. Se e Car pe nt ie r v. C ommis si on er, T.C. Mem o. 2 01 3- 16 0. Pe ti ti on er s ub se qu en tl y fil edhe r m ot io n fo r anawardof adm in is tra ti ve an d l it ig at io n c os ts an d fe es (awardm ot io n) . In the awardm ot io n 2 pe ti ti on er s ou gh t u nd er s ect io n 7 43 0 t o re co ve r co st s an d fe es of app ro xi m at el y
Pet it io ne r or ig in al ly file d am ot io n fo r co st s an d fe es onApri l 1 9, 2 01 3, 2 whi chth e Co urt d en ie d wi th ou t p reju di ce b ecau se itwas p rem atur e.- 5 -

[* 5] $5 ,50 0 tha t s he in cu rreddu rin g the adm in is tra ti ve an d c ou rt p ro ceed in gs co nc ern in g h er 2 00 4 d efi ci en cy . Earl y inSep te m

be r 20 13 Caro li ne Ch enof t he San taCla ra Un iv ers ity Sch oo l o f Law Low-In co m e Tax pa y er Cl in ic be ga n re pr es en ti ng pe ti ti on er i n h er pu rs ui t o f co st s an d fe es un de r se ct io n 7 43 0. Near th e en d o f th atsame mon th pe ti ti on er fi le d am ot io n fo r le av e to supp le m en t h er awar d m ot io n. Th e Co urt de ni edhe r m ot io n wi th ou t p reju di ce. Dur in g J anua ry 20 14 pe ti ti on er ag ai n fi le d a m ot io n fo r le av e to supp le m en t h er awar d m ot io n. Th is ti m e th e Co urt g ran te d pe ti ti on er’s m ot io n a ndfil edhe r supp le m en t t o h er awar d m ot io n. Inth e supp le m en t p et it io ne r cl ai m s tha t s he in cu rredinco nn ect io n wi th th is in te res t ab at em en t p ro ceed in g c os ts an d fe es to ta li ng : (1 ) $4 ,12 5 o f co st s fo r th e se rv ic es of Jen ki ns Inc om e Tax Serv ic es (Je nk in s) an d (2 ) a $ 60 fil in g fe e. Pet it io ne r al so cl ai m s i n the supp le m en t t o h er awar d m ot io n tha t h er atto rn ey , Ms . Che n, i s en ti tl edto a $6 ,01 0 a wardof a tt orne y ’s fees forpro bo no servi ces ren de redinth is pr oc eed in g. 3

Pet it io ne r as se rte d i n h er s up pl em en t tha t M s. Ch enis en ti tl edto th e award . 3 Sec. 7 43 0( l)( 3) (B); see als o Di xo n v . Commis si on er, 1 32 T.C. 55 , 87 n.2 9 (2 00 9) .- 6 -

[* 6] Dis cu ss io n If ce rta in requi rem en ts are m et , sec ti on74 30 (a) aut ho riz es anawardto a pr ev ai li ng pa rty of rea so nabl e li ti ga ti on an d a dm in is tra ti ve fees an d c os ts pa idor in cu rredbe fo re o r du rin g aco urt p ro ceed in g wh ic h i s b ro ug htby or ag ai ns t the Uni te d S tate s i n c on ne ct io n wi th th e d et erm in at io n, co ll ect io n, o r refu ndof any ta x, i nt eres t, o r pe na lty

un de r th e In te rn al Rev enue Co de . The t axpa y er m us t es tabl is h tha t s he : (1 ) is th e p rev ai li ng pa rty; (2 ) ha s ex haus te d the av ai labl e adm in is tra ti ve rem ed ie s; (3) ha s n otun reas on ab ly pro tra ct edth e co urt pr oc eed in gs ; an d (4 ) ha s cl ai m edli ti ga ti on co st s tha t ar e rea so nabl e. Sec. 7 43 0( a), (b )(1 ), (3 ). The m ov in g p arty be ars th e b ur de n o f pr ov in g tha t s he m eet s the requi rem en ts of s ect io n 7 43 0. Ru le 23 2( e). Pet it io ne r se ek s t o re co ve r adm in is tra ti ve an d l it ig at io n c os ts an d fe es rel at in g t o the 20 04 de fic ie nc y pro ceed in gs as we ll as o th er s uc h c os ts an d fe es rel at in g t o the in st an t i nt eres t ab at em en t p ro ceed in g. We addres s ea chintu rn . I. Co st s an d F ees Rel at in g t o the 20 04 Defi ci en cy Pro ceed in gs Pet it io ne r co nt en ds th atun de r se ct io n 7 43 0 s he canreco ve r in th is pr oc eed in g a dm in is tra ti ve an d l it ig at io n c os ts an d fe es th atsh e in cu rredin co nn ect io n wi th th e 2 00 4 d efi ci en cy pro ceed in gs . Res po nd en t co nt en ds sh e can no t. Thi s i ss ue pre se nt s a que st io n s im il ar t o the on e p res en te d i n Gri go raci v.- 7 -

[* 7] Co m m is si on er, 1 22 T.C. 27 2 (2 00 4) , whi chin vo lv eda de fic ie nc y pro ceed in g. Inth is in st an ce, h owe ve r, we co ns id er the co st s an d fe es a ta xp ay er m ay reco ve r un de r se ct io n 7 43 0 i n a n i nt eres t ab at em en t p ro ceed in g a ndth e in te rp lay be twee n se ct io n 6 40 4 a ndsec ti on 74 30 . A. Back gr ou nd Sect io n 6 40 4( e) au th or iz es th e Sec ret ary to ab at e in te res t at tri bu tabl e to un reas on ab le erro rs or d el ay s b y th e In te rn al Rev enue Serv ic e in pe rfo rm in g a m in is te ria l ac t o r m an ag eri al act . In a p ro ceed in g u nd er s ect io n 6 40 4( h) , th is Co urt h as juri sd ic ti on to de ci de whet he r th e Co m m is si on er’s d en ia l o f anin te res t ab at em en t was anab us e o f di sc ret io n a ndm ay ord er an ab at em en t. Sect io n 4 64 04 (h ) do es no t g ran t juris di ct io n t o thi s C ou rt o ve r th e und erl y in g l iabi li ti es or de fic ie nc ie s fo r th e sa m e ta xabl e y ear. Whenth e Co m m is si on er d et erm in es a de fic ie nc y

an d the tax pa y er p et it io ns th is Co urt, tha t d efi ci en cy m ay no t b e as se ss edun ti l a d eci si on is en te red , see sec . 62 13 (a), an d a n i nt eres t ab at em en t

Inco ns id eri ng whet he r th e Co m m is si on er ab us edhi s d is cret io n i n d en y in g 4 anin te res t ab at em en t cl ai m we m ay rev ie w th e fac ts th attrans pi reddurin g a nd be fo re the de fic ie nc y

pro ceed in g fo r th e sam e ta xabl e p eri od . Sec. 6 40 4( e).- 8 -

[* 8] cas e, as a m at te r of

law, ca nn otbe in st itut edun ti l the co nc lu si onof t he de fic ie nc y

pro ceed in g fo r th e sam e ta x year, sec . 64 04 (e)( 1) (A). 5 B. Anal y si s Sect io n 7 43 0( a) al lo ws “ [i]n a ny adm in is tra ti ve or c ou rt p ro ceed in g” an awardof “ reas on ab le adm in is tra ti ve co st s i nc urredinco nn ect io n wi th su ch adm in is tra ti ve pro ceed in g” an d “ reas on ab le li ti ga ti on co st s i nc urredinco nn ect io n with s uc h c ou rt p ro ceed in g” . Peti ti on er co nt en ds th atth e adm in is tra ti ve po rti on of th is cas e in cl ud es no t o nl y th e adm in is tra ti ve pe rio d wi th in whi chhe r in te res t ab at em en t cl ai m

was c on si de redan d d en ie d, b utals o the adm in is tra ti ve pe rio d a nd pa rt o f th e li ti ga ti onpe rio d o f he r 20 04 de fic ie nc y pro ceed in gs (th e sa m e p eri od th atwas o ccas io ne d b y

th e d el ay th atis th e fo un da ti on forpe ti ti on er’s s uc ces sf ul pu rs ui t o f anab at em en t). Re sp on de ntco nt en ds th atth e in te res t ab at em en t pr oc eed in g d oe s n otin cl ud e th e adm in is tra ti ve or l it ig at io n p eri od s re la ti ng to pe ti ti on er’s 2 00 4 d efi ci en cy pro ceed in gs an d the refo re p et it io ne r can no t re co ve r an y co st s fr om

th os e p eri od s. Th e que st io n p os edco nc ern s the m ean in g o f th e te rm “pr oc eed in g” inth e co nt ex t o f se ct io n 7 43 0( a).

Tha t i s b ecau se th e am ountof a ny inc om e ta x l iabi li ty andan y in te res t 5 th ereo n i s u nkno wn an d c anno t b e as se ss edun ti l the de fic ie nc y pro ceed in g i s co nc lu de d.- 9 -

[* 9] Res po nd en t re li es onGrig or aci . In tha t ca se , th e ta xp ay er s ou gh t co st s an d fees for a pr io r cas e in vo lv in g s im il ar i ss ue s. Th is Co urt d idno t al lo w th e ta xp ay er i n Gri go raci to reco ve r co st s fo r a s im il ar ty pe of p ro ceed in g i nv ol vi ng a di ffer en t t ax ab le pe rio d. We hel d tha t s ect io n 7 43 0 l im it s the reco ve ry of c os ts an d fe es in curredto th e p ro ceed in g c urren tl y be fo re the Co urt b ecau se each cas e co ns ti tu te s a d is ti nc t an d s ep arat e p ro ceed in g fo r pu rp os es of s ect io n 7 43 0. Inth is sec ti on 64 04 in te res t ab at em en t p ro ceed in g, p et it io ne r is see ki ng co st s an d fe es in cu rreddu rin g the adm in is tra ti ve an d l it ig at io n p eri od s o f he r 20 04 de fic ie nc y

pro ceed in gs . Eventh ou gh th e in te res t ab at em en t ca se co nc ern s the sa m e ta x year as th e d efi ci en cy cas e, th e in te res t ab at em en t p ro ceed in g i s st atut or il y , juri sd ic ti on al ly, an d c hr on ol og ic al ly sep arat e an d d is ti nc t fr om th e 20 04 de fic ie nc y

pro ceed in gs for

pu rp os es of s ect io n 7 43 0. Hen ce, the co st s an d fees rel at edto th e 2 00 4 d efi ci en cy pro ceed in gs were n ot“ in cu rredinco nn ect io n with” th e in st an t i nt eres t ab at em en t p ro ceed in g. We thus ho ldth atpe ti ti on er i s no t el ig ib le to reco ve r th os e co st s an d fe es . 6 W e al so no te th atun de r Ru le 23 1( a) an y awardof a dm in is tra ti ve or 6 li ti ga ti on co st s wi th res pe ctto th e 2 00 4 d efi ci en cy pro ceed in g was requi redto be in cl ud edinth e st ip ul at edde ci si on whi chth e p art ie s s ub m it te d t o thi s C ou rt f or en try of d eci si onan d wh ic h thi s C ou rt e nt ered . Peti ti on er, h owe ve r, di d n otass ert en ti tl em en t t o a ny cos ts or f ees inth e d efi ci en cy

pro ceed in g, the de ci si on inwhi ch be cam e fi na l s om e ti m e ag o. Acco rd in gl y , all owi ng pe ti ti on er t o re co ve r th os e (co nt in ue d...)- 10 -

[* 10 ] W e rec og ni ze tha t p et it io ne r’s in ab il ity to rai se anin te res t ab at em en t cl ai m in he r 20 04 de fic ie nc y

pro ceed in gs res ul te d i n h er i nabi li ty to b e th e p rev ai li ng pa rty in t ho se pro ceed in gs an d t o re co ve r co st s an d fe es forres po nd en t’s d el ay . Und er ex is ti ng law, h owe ve r, a ta xp ay er i s l eftwith n o re m edy or abi li ty to reco ve r co st s caus edby the de lay or a ct io ns of t he Co m

m is si on er’s em

pl oyees du rin g the pe rio d g iv in g ri se to th e ab at em en t o f in te res t cl ai m . Thatres ul t, as hi gh li gh te d b y

th e ci rcu m st an ces of t hi s ca se , is un fo rtu na te an d i ro ni c, bu t so m ethi ng th atcanbe rem ed ie d o nl y by Con gr es s. II. Co st s an d F ees Rel at in g t o the Ins tantInt eres t Ab at em en t Pr oc eed in g W e n ow turn t o the co st s an d fe es in cu rredinth is pro ceed in g. Th os e co st s an d fe es in cl ud e: (1) $4 ,12 5 o f co st s fo r th e se rv ic es of t he pro fes si on al s at Je nk in s In co m e Tax Serv ic es , (2) a $6 0 Tax Co urt fi li ng fee, an d (3 ) $6 ,01 0 o f at to rn ey ’s fees forth e p ro bo no servi ces of M s. Ch eninth is pro ceed in g. 7

(...co nt inue d) 6 co st s an d fe es no w wou ldbe inco nt rav en ti onof Rul e 2 31 (a). The Co urt m ay

awardreas on ab le att orne y ’s fees for pro bo no leg al servi ces 7 to th e at to rn ey

or the att orne y ’s em

pl oyer, eve n tho ug h atax pa y er d oe s n ot“ in cu r” th os e fee s. Sec . 74 30 (c)( 3) (B). We als o n ot e th atreas on ab le li ti ga ti on co st s m ay in cl ud e rea so nabl e fee s i nc urredinco nn ect io n wi tha se c. 74 30 pro ceed in g i ts el f. See, e.g ., Fiel ds v. Co m

mis si on er, T.C. Mem o. 2 00 2- 32 0.- 11 -

[* 11 ] Res po nd en t co nc ed es th atpe ti ti on er i s the pre va il in g p arty inth is pr oc eed in g, th atsh e d idno t u nr eas on ab ly pro tra ctth e p ro ceed in gs , andth atsh e

8 ex haus te d a ll admin is tra ti ve rem ed ie s. Re sp on de ntals o c on ced es th atpe ti ti on er m ay reco ve r th e $ 60 fil in g fe e fo r th e p et it io n i n thi s ca se . Res po nd en t, h owe ve r, arg ue s tha t the re s ho ul d n otbe an y awardforth e co st s an d fe es rel at edto th e se rv ic es of J en ki ns an d M s. Ch en . Fi rs t, re sp on de ntarg ue s tha t p et it io ne r is pre cl ud edfro m reco ve rin g a ny of th e co st s an d fe es sh e se ek s b ecau se sh e fai le d t o s ub m itth e d ecl arat io ns or affi da vi ts requi redun de r Ru le 23 1( d) an d R ul e 2 32 (d ). W e d is ag ree. Pu t s im pl y , aft er re vi ewin g p et it io ne r’s fil in gs , we fin d tha t p et it io ne r ha s s ub st an ti al ly co m pl ie d wi th th os e ru le s. Seco nd , res po nd en t ar gu es th atpe ti ti on er h as no t s ho wn tha t the co st s an d fees sh e se ek s t o re co ve r are reas on ab le . W e ag ree i n p art . The rec or d d oe s n ot es tabl is h tha t ce rta in co st s o f Je nk in s re late to th is pro ceed in g a ndfai ls to est ab li sh th atothe rs are re as on ab le . For i ns tanc e, a J en ki ns in vo ic e in di cat es th ata Inhi s re sp on se to pe ti ti on er’s m ot io n fo r adm in is tra ti ve an d l it ig at io n 8 co st s, re sp on de ntco nc ed edth atpe ti ti on er was th e “pr ev ai li ng pa rty” andas a co ns eque nc e, se e se c. 74 30 (c)( 4) , als o c on ced edth atpe ti ti on er m etth e n etwort h requi rem en t o f se c. 74 30 (c)( 4) (A)(i ii ). Res po nd en t n ow at te m pt s t o wi th dr aw th es e co nc es si on s i n h is ob jecti on to pe ti ti on er’s m ot io n fo r le av e to supp le m en t he r m ot io n fo r adm in is tra ti ve an d l it ig at io n c os ts . W e wil l n otall ow re sp on de ntto pl ay fas t an d l oo se with h is co nc es si on s an d h ol d we t ha t h e is bo un d b y th em .- 12 -

[* 12 ] co nf

eren ce ca ll am on g p et it io ne r, a Je nk in s p ro fes si on al , andMs . Che n la st edsi x h ou rs . Howev er, Ms . Che n re po rte d tha t the same con fere nc e cal l l as te d th ree h ou rs . Peti ti on er d oe s n otex pl ai n the di sp ari ty. Ano th er i ns tanc e in vo lv es a Je nk in s co stcla im edfora co nf eren ce wi th th e App eal s Off ic e th atpu rp orte dl y to okpl ace afew week s b efo re tria l. The reco rddo es no t re fle ctth atpe ti ti on er’s cas e was with Ap pe al s dur in g tha t t im e, no r do es itrefl ectth e n atur e o f th e pu rp orte d Ap pe al s co nf

eren ce. Des pi te pe cu li ari ti es with c ert ai n J en ki ns co st s, we fin d tha t the reco rdrefl ect s tha t p et it io ne r in cu rredreas on ab le Jen ki ns co st s o f $2 ,45 0. As fo r Ms . Che n’s fe es , th e rec or d re fle ct s tha t a p orti onof t he fees was at tri bu tabl e to in su ffi ci en t fi li ng s o r was ex ces si ve inam ountgi ve n the na tu re o f th e co rres po nd in g s erv ic es . On th e b as is of o urrev ie w of the reco rd , we fin d tha t on ly $2,0 00 of t he cla im edfees forMs . Che n’s s erv ic es was re as on ab le . Inreac hi ng ou r ho ld in gs he rei n, we h av e co ns id eredall arg um en ts m ad e, an d, t o the ex te ntno t m en ti on edab ov e, we co nc lu de th ey are m oo t, i rrel ev an t, o r witho utm eri t.- 13 -

[* 13 ] To re fle ctth e fo reg oi ng , An ap pr op ria te ord er an d de ci si on wil l b e en te red .