TAX COURT OPINION

Case: Gary R. Davis
Docket Number: 6343-04
Judge: Laro
Opinion Type: memo
Filed: 08/24/2005
Pages: 8

T.C. Memo. 2005-202 UNITED STATES TAX COURT GARY R. DAVIS, Petitioner 1. .COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 6343-04. Filed August 24, 2005. Robert D. Grossman, Jr. , for petitioner. .. Paul K. Voelker, for respondent MEMORANDUM OPINION LARO, Judge: Petitioner moves the Court under section 7430 to award him litigation costs of Š7, 893.75.¹ Respondent objects to this motion, arguing: (1) Petitioner did not exhaust his ¹ Unless otherwise indicated, section references are to the applicable versions of references are to the Tax Court' Rules of Practice and Procedure. the Internal Revenue Code, and Rule SEftVED AUG 2 4 2005 -2- administrative remedies, (2) respondent's position in this proceeding was substantially justified, and (3) some of the requested costs are unreasonable. We ordered the parties to stipulate the facts underlying this motion, and they have done so. We decide herein whether to grant petitioner's motion. We shall not. Background Most facts were stipulated. We incorporate herein by this reference the parties' stipulation of facts and the exhibits submitted therewith. We find the stipulated facts accordingly. Petitioner resided in Las Vegas, Nevada, when his petition was filed with the Court. For approximately the 13-month period ending in or about October 1999, petitioner and his then wife, Theresa Davis (Davis), owned and resided in a home in Las Vegas at 4302 .. Callahan Avenue (4302 Callahan). Pehitioner and Davis separated at the end of that period, and for ahproximately the next 2 months, Davis resided at 4302 Callahan, and petitioner resided with relatives. On December 16, 1999, The Gary R. Davis Living Trust, Gary R. Davis Trustee, purchased a house in Las Vegas at 629 Mariola St. (629 Mariola). Petitioner resided at 629 Mariola from approximately December 1999 to approximately April 2003. Petitioner and Davis sold the home at 4302 Callahan on February 23, 2000, for $525,000. . -3- On or about April 15, 2001, petitioner filed a 2000 Federal income tax return (2000 return) using the filing status of "Single". Petitioner's 2000 return was prepared by a certified public accountant named Gary Campbell (Campbell). Petitioner's 2000 return reported that petitioner's address was 4302 Callahan and that his total income and taxable income were $6,524 and zero, respectively. Petitioner's 2000 return reported that petitioner's total income consisted of taxable interest of $939, ordinary dividends of $103, business income of $93,886 (gross income of $20,8,170 less total expenses of $114,284), a capital loss of $3,000, taxable individual retirement account (IRA) distributions of $3,527, and passthrough losses totaling $88,931. Respondent processed petitioner's 2000 return on July 23, 2001. Respondent received certain information returns relating to petitioner's 2000 return. In relevant part, respondent received: (1)A 2000 Form W-2, Wage and Tax Staltement, reporting that petitioner had received wages of $165,586 and (2)a 2000 Form 1099-S, Proceeds From Real Estate Transactions, reporting that petitioner had received $525,000 from the sale of 4302 Callahan. On October 25, 2002, respondent mailed to petitioner at 4302 Callahan a Letter 2201(DO) (examination notice) stating that petitioner's 2000 return had been selected for examination.2 The 2 More specifically, the letter was addressed to petitioner and Davis (then known as Theresa L. Ricci), attention petitioner. -4- examination notice was an initial contact letter and dïd not offer petitioner an opportunity to meet with respondent's Office of Appeals (Appeals). One day before mailing the examination notice to petitioner, respondent had checked his computer records for petitioner's address. Those records listed petitioner's address as 629 Mariola. Respondent did not mail an examination notice to petitioner at 629 Mariola. Petitioner timely filed (pursuant to extensions) a joint 2001 Federal income tax return (2001 return). Petitioner's 2001 return was prepared by Campbell and reported that petitioner's address was. 4302 Callahan. Respondent received petitioner's 2001 return on October 21, 2002, and processed it on November 18, 2002. On April 4, 2003, respondent checked his computer records for petitioner's address. Those records listed petitioner's .. address as 4302 Callahan. On the sade day, respondent mailed a Letter 915(DO) (30-day letter) for 2000 to petitioner at 4302 Callahan. The 30-day letter informed petitioner that he could request a conference with the Appeals Office and was accompanied by two copies of the examination notice. On September 19, 2003, respondent mailed to petitioner at 4302 Callahan a Letter 1912(DO) that was accompanied by another copy of the examination notice. The Letter 1912(DO) stated that respondent's Small Business and Self-Employed Division had reviewed petitioner's 2000 return and detected that respondent had not received petitioner's agreement to the proposed changes. The Letter 1912(DO) stated that petitioner should contact the representative designated on the letter within 10 days or that a notice of deficiency would be issued to petitioner for 2000. The Letter 1912(DO) referenced and was accompanied by a publication that discussed the examination process and petitioner's appeal rights. On November 14, 2003, after not having received a response from petitioner as to the Letter 1912(DO), respondent's district office closed petitioner's case and recommended that a notice of deficiency be issued to petitioner for 2000. Respondent received petitioner's timely filed (pursuant to extensions) joint 2002 Federal income tax return (2002 return) on October 19, 2003, and processed it on November 24, 2003. Petitioner's 2002 return reported that petitioner's address was.. in Las Vegas at 912 Sir James BridgelWay (912 Sir James Bridge). Petitioner had purchased 912 Sir JamÃs Bridge on April 7, 2003. Petitioner had sold 629 Mariola on April 18, 2003. On January 15, 2004, respondent mailed a notice of . deficiency for 2000 to petitioner at 912 Sir James Bridge. This notice determined an income tax deficiency of $107,844 and a section 6662(a) accuracy-related penalty of $19,740.60. For the most part, respondent determined in the notice that petitioner . was taxable on the sales proceeds reported on Form 1099-S and was not entitled to business expenses, itemized deductions, and exemptions claimed on the 2000 return. The parties now agree that the deficiency and accuracy-related penalty are both zero. Discussion Petitioner moves the Court under section 7430 to award him litigation costs of $7,893.75. We may grant this motion if he meets all of the statutory requirements for such an award. See sec. 7430(a), (b), and (c); Rule 232(e); see also Corson v. Commissioner, 123 T.C. 202, 205-206 (2004); Minahan v. Commissioner, 88 T.C. 492, 497 (1987); Han v. Commissioner, T.C. Memo. 1993-386. The parties dispute the three requirements noted supra pp. 1-2. We focus on the first of those requirements; namely, that a taxpayer exhaust administrative remedies available within the Internal Revenue Service (IRS) before petitioning this Court as to the underlying taxable year. See sec. 7430(b)(1). .. We conclude that petitioner has not het this requirement. Section 301.7430-1(b)(1), Proced. & Admin. Regs., interprets section 7430(b)(1) to require generally that a party participate in an Appeals Office conference, if one is available, before petitioning this Court with respect to the underlying year. See Haas & Associates Accountancy Corp. v. Commissioner, 117 T.C. 48 (2001), affd. 55 Fed. Appx. 476 (9th Cir. 2003). Section 301.7430-1(e) (2), Proced. & Admin. Regs., states in relevant part that this requirement is met, in that a party's administrative -7- remedies within .the IRS are deemed to be exhausted for purposes of section 7430, if . . The party did not-re,ceive a notice of proposed deficiency (30-day leÈter) prior to the issuance of the statutory notice .[of defigiencyl and the failure to receive such not ice was not due to aä€ions öf the party (such as a failure. to supply requested information or a current mailing address to the district director or service centei- having jurisdiction over the pax matter) . . We understand petìctioner to argue that he has niet. this requirement in that, he claims, he did nòt knbw his "2000 return was under exàmination until he received the notice of deficiency. According to petitioner, respondent sent all prior correspondence for that year to an addr ss that, petitÃor er claimŠ, respondent should have known was not petitiorier' s address. Petitioner points to the fact that respondenËs ecoriis on October 24, 2002, listed petitionèr' s address as 629 Plariolá, and he asse.rts that this listing required that respondeñt after tíhat date send correspondence (or at least copies of that correspondence) all to petitioner at that address.. Petitioner reçognizes that respondent processed.petifìoner's 2001 return after October 24, 2002, and that this return reported e itioner's address as 4302 Callahan. Petitioner sserts that this Yeporting was an error that he did not notice but that respondeñt should hävé known about. . . We,disagree with petition r s arguinent that he has met the . requirement as to exhausting adininistrative femedies within the l - returñ each signed that return deólaring úñder pénalties of . perjury that e or shŠ liad "ekamiñé'd Eliis -return" and that it was "true, correct, and cói plet e".5 . . . We hold thÄt petí€ío~ñer does nòt qualify for atr award of litigÃtion costs u'nder se tion 7430. De havè cohsidesed all argum~ents Íbr a contrary holblitigWnd-find thóse argument not discu sed herein to be if eléVant, Owi'thout merit, or -improperly raised ih petitióner' s epÈÿ to 'respoñdent' s objedtion c Tó refleót the föregof5c}, . An appropriate .order will be issued,. and decision will be entered in accordance with the parties' settlement. 5 Petitioner also relies erroneously on the fact that respondent knew before issuing the notice of deficiency that 'As petitionef ad at \Íëa t at' one t'imé½ésided at 629 Mariola. statêd àboirè2; thë 4302 CàllahEñ address on thë 2001 Eétdrn made'thât åddress petitioner's-eddress of record.at all relevant times thereafter. the repörtiiig of I