t c memo united_states tax_court gilbert vasquez petitioner v commissioner of internal revenue respondent docket no filed date p claimed earned_income_credit eic as a refund of dollar_figure on hi sec_2002 tax_return on date r sent a packet of materials to p proposing to disallow the eic stating that the claimed refund was frozen requiring p to return form_4549 and your payment of dollar_figure in the enclosed envelope by requesting p to provide documents supporting his claimed eic and warning p that a notice_of_deficiency would be sent to him if the documents were not received by date p failed to respond and on date r sent the notice_of_deficiency of dollar_figure on which this case is based p secured counsel and filed a petition r filed an answer embodying the position r took in the notice_of_deficiency six weeks after the answer r notified p that p’s case was in r’s appeals_office three months after the notification months after the answer p filed a motion in limine for an order ruling certain documents are not inadmissible hearsay based on those documents r eventually conceded the eic and eventually the parties submitted a proposed decision that p had an overpayment of dollar_figure we entered the decision p then moved for litigation costs of dollar_figure dollar_figure at market rate on opening legal memorandum p contends that awardable costs on this dollar_figure case have risen to dollar_figure dollar_figure at market rate we vacated the entry of decision and filed the litigation costs motion held p’s motion for litigation costs denied r established that r’s position in this case was substantially justified sec_7430 i r c other contentions evaluated jeffrey d moffatt for petitioner lorraine y wu for respondent memorandum opinion chabot judge this matter is before us on petitioner’s motion for an award of reasonable_litigation_costs pursuant to section and rule respondent determined a deficiency in individual income_tax against petitioner in the amount of dollar_figure for the determined deficiency arose from petitioner’s claim of a refundable earned_income_credit in that amount under sec_32 unless indicated otherwise all references to sec_7430 and sec_7453 are to those sections of the internal_revenue_code_of_1986 as in effect for proceedings commenced at the time the petition in the instant case was filed all other section references are to sections of the internal_revenue_code_of_1986 as in effect for the year in issue unless indicated otherwise all rule references are to the tax_court rules_of_practice and procedure the parties settled the disputed deficiency by stipulating that there is an overpayment of dollar_figure for petitioner asks us to award reasonable litigation cost sec_3 of dollar_figure based on statutory rates for legal fees or dollar_figure based on market rate for legal fees the issues for decision are whether petitioner is entitled to an award of reasonable_litigation_costs and if the answer to the first issue is yes then what is the amount of the awardable costs neither petitioner’s motion for award of litigation costs nor respondent’s response to the motion requested a hearing on the motion rules b and b final flush language in his memoranda of law petitioner states that he has been handicapped by the court’s indication that it would not authorize depositions of certain of respondent’s employees we have petitioner has requested only litigation costs in the instant case so we do not consider the statutory or regulatory provisions that apply only to administrative costs these amounts are stated in petitioner’s opening legal memorandum on the litigation costs motion petitioner’s answering legal memorandum on this motion asserts that h preparing this brief has taken another hours of time which petitioner’s counsel requests to be compensated for petitioner’s motion for litigation costs received days after the court had entered the parties’ stipulated decision included an estimate that litigation costs up to that point would amount to dollar_figure based on statutory rates for legal fees or dollar_figure based on market rate for legal fees examined the parties’ stipulations and memoranda of law as well as petitioner’s supplement to the motion and the documents attached thereto and conclude that the litigation costs motion may properly be resolved with neither an evidentiary hearing nor the authorization of contested depositions see rules a last sentence b first sentence the parties have presented admissibility disputes in certain of their stipulations we rule on these evidentiary disputes infra as the first items under discussion background when the petition was filed in the instant case petitioner resided in lancaster california on hi sec_2002 income_tax return form 1040a u s individual_income_tax_return petitioner showed his filing_status as single and claimed five dependents--vv sv ah eh and jh petitioner reported wage compensation income of dollar_figure and adjusted_gross_income of dollar_figure he claimed the standard_deduction of dollar_figure a personal exemptions deduction of dollar_figure and an earned_income_credit of dollar_figure he did not show a sec_1 tax_liability he claimed the entire dollar_figure as an overpayment and asked that all of it be refunded by direct deposit into an neither the stipulated copy of petitioner’s electronically filed tax_return nor the stipulation indicates when the tax_return was filed we assume the tax_return was filed timely we refer to the minor children by their initials only indicated checking account to his form 1040a petitioner attached a form_8862 information to claim earned_income_credit after disallowance and a schedule eic earned_income_credit qualifying_child information with appropriate information as to vv and sv on his tax_return including the form_8862 and the schedule eic petitioner stated that vv and sv were his sons that vv was born in and that sv was born in and that vv and sv each lived with petitioner in the united_states for months on date respondent sent to petitioner a two-page letter letter b-ez sc to which was attached the following a two-page document relating to the earned_income_credit form 886-h-eic a one-page document relating to support documents for dependency_exemptions form 886-h-dep a two-page document relating to income_tax examination changes form_4549 and a one-page document relating to explanation items form a this letter and the attached documents are hereinafter sometimes collectively described as the date letter the date letter informed petitioner that respondent was examining petitioner’ sec_2002 income_tax return and proposed to the letter also showed that a copy of publication the examination process was enclosed but the stipulated exhibit does not include the publication disallow exemption s earned_income_credit it instructed petitioner as follows if you agree with all the changes listed on the enclosed form_4549 please sign and date form_4549 and return form_4549 and your payment of dollar_figure dollar_figure in the enclosed envelope by make your check or money order payable to united_states treasury we may charge interest for payments received after if you can’t pay the total amount please return form_4549 and contact us pincite-1291 to discuss payment arrangements the date letter then instructed petitioner as follows if you do not agree if you do not agree with all the changes listed on form_4549 please send us the following information by a letter telling us what item s you disagree with and why and clear photocopies of the records information and or supporting documents listed on the enclosed form s 886h-dep 886h-eic to support the items listed above it is not necessary to include more than one copy of any document if you do not reply if we do not receive your supporting documents by we will send you a notice_of_deficiency this is a legal document explaining the proposed changes and the amount of the proposed tax increase important notes if you do not agree it’s important that we receive your written response by please read the enclosed form s 886h-dep 886h-eic which lists the types of documents needed to support your claim and includes helpful information on the earned_income_credit dependency_exemptions and head_of_household filing_status to speed up your service please use the enclosed envelope or address your reply to internal_revenue_service field compliance services fresno ca include a copy of this letter with your response include a telephone number with the area code and the best time for us to call you in case we need more information telephone number best time to call g home g work g cell phone after we review what you’ve sent us we will contact you with the results if you still disagree with our findings you have the right to file an administrative appeal as explained in the enclosed publication the examination process questions if you have any questions about this letter please call for assistance you can also visit our web site at www irs gov for additional information the enclosed form 886-h-eic supporting documents for taxpayers claiming eic on the basis of a qualifying_child ren instructed as follows as relevant to petitioner’s claim if the qualifying children are the taxpayer’s sons or daughters then the taxpayer is not required to document the relationship if the qualifying children are less than years old then the taxpayer is not required to document the age and the following must be sent to support the residency test to show that the child lived with you for more than half of send one of the following school records medical records daycare records or social services records that show names common address and dates or one letter on official letterhead from the school your medical provider your clergy or other similar organizations that show names common address and dates if you send a letter from a relative who provides your daycare you must send at least one additional letter from the list above you can send more than one document to show that the child lived with you for more than half the year the enclosed form 886-h-dep supporting documents for dependency_exemptions instructed petitioner to provide information as to the claimed dependents’ support the enclosed form_4549 income_tax examination changes showed that respondent proposed to disallow all five of the claimed dependency_exemptions as well as the earned_income_credit as a result of which there would be neither a balance due nor an overpayment of petitioner’s income_tax the enclosed form 886-a explanation of items stated that the claimed refund was frozen petitioner failed to respond to the date letter on date respondent issued the notice_of_deficiency on which the instant case is based the notice_of_deficiency explanations are as follows earned_income_credit per return dollar_figure per exam dollar_figure per adjustment dollar_figure since you did not establish that you were entitled to the earned_income_credit we disallowed it exemptions per return per exam per adjustment since you did not establish that you are entitled to the exemptions s it they is are being disallowed petitioner first consulted with jeffrey d moffatt hereinafter sometimes referred to as moffatt petitioner’s counsel in the instant case on date petitioner retained moffatt on date on date moffatt filed a timely petition on petitioner’s behalf paragraph of this petition is as follows the determination of the tax set forth in the said notice_of_deficiency or liability is based upon the following errors a petitioner was improperly denied his requested earned_income_credit hereinafter referred to as eic b petitioner provided the requested documentation to the internal_revenue_service to support his claim of the earned_income_credit c petitioner responded to requests for information within the time deadlines requested by the internal_revenue_service d did petitioner comply to the amount necessary and in the time frame necessary to allow a claim for legal fees for this present litigation e has petitioner proved his position by a preponderance_of_the_evidence which will then allow for legal fees to be covered by respondent reproduced literally the answer was filed on date by debra a bowe hereinafter sometimes referred to as bowe associate area_counsel small_business self-employed paragraph of this answer is as follows a b c denies d and e alleges these are not assignments of error susceptible to an admission or denial by respondent the answer denies for lack of present information substantially_all of the petition’s fact allegations the denial of the claimed dependency_exemption deductions does not affect petitioner’s income_tax_liability accordingly we treat the earned_income_credit as the only relevant tax issue in the instant case on date respondent’s counsel’s office sent documents in petitioner’s case copies of the petition and the answer with a note that the administrative file was available to the appeals_office for considerationdollar_figure on date the appeals_office sent a letter to petitioner11 advising him that his case had been received for consideration in the appeals_office explaining what the appeals_office does suggesting that petitioner contact the ‘person to contact’ listed above with any questions about the appeals process or how you can prepare for your hearing and showing cynthia ace hereinafter sometimes referred to as ace as the person to contact the case was assigned to ace on date respondent’s answer was filed on date when the court received it however respondent had mailed the answer to the court and had served it on petitioner on date the date of the referral to the appeals_office see rule b moffatt’s records show that he received the answer on date see revproc_87_24 1987_1_cb_720 for respondent’s procedures and the division of authority as to the appeals_office and respondent’s counsel before this court see also sec_7452 as we have found moffatt filed the petition thereby having entered his appearance for petitioner rule a respondent’s answer included bowe’s certificate of service of the answer on moffatt rule b the record does not include an explanation of why the appeals_office notified petitioner directly and apparently did not notify moffatt on date petitioner brought to moffatt the date appeals_office letter on date petitioner filed a motion in limine for an order allowing for the following documents to come in as hearsay exceptions and or hearsay exclusions and or do not constitute hearsay at all the documents included birth certificates for vv and sv and various school and state court documents relating to one or more of the claimed dependents see supra note attached to the motion was moffatt’s certificate of service on bowe see rule b the motion did not include any statement that prior notice had been given to bowe or any other of respondent’s counsel nor did the motion state whether respondent objected to the motion see rule a on date the court calendared the instant case for hearing on petitioner’s motion in limine at the court’s date los angeles trial session on date respondent’s counsel’s office mailed to ace a copy of petitioner’s motion in limine for consideration of petitioner’s documentation on date moffatt called ace and asked about the status of the case ace explained to moffatt that she had not yet looked at the case because the case was not yet scheduled for trial moffatt wanted to know who was respondent’s counsel on the case ace called area_counsel and learned that no attorney had yet been assigned to the case ace transmitted this information to moffatt moffatt asked ace if he could get litigation costs if he settled with the appeals_office ace told him that she did not think so but that she would find out on date ace having evaluated the materials concluded that respondent should concede the earned_income_credit issue on date the case was called at the calendar call for the court’s trial session to deal with petitioner’s motion in limine respondent was represented by nguyen hoang hereinafter sometimes referred to as hoang and petitioner was represented by moffatt hoang stated that the purpose of petitioner’s motion in limine could best be achieved during the stipulation process which would follow the appeals process moffatt stated that he had subpoenaed government employees to come to the hearing on the motion in order to authenticate the documents and support the documents’ admissibility moffatt stated that if the motion is heard and the witnesses are allowed to testify i think the case will not need to go further in trial i think it will be settled by summary_judgment the court directed counsel to meet discuss the documents and report back about hours later the case was recalled hoang agreed to stipulate all the documents in petitioner’s motion in limine as follows ms hoang your honor dan o’neill a paralegal for the respondent has looked at the documents he has indicated that respondent will stipulate to all of the documents so the next step will be that mr o’neill will prepare a draft stipulation of facts and hopefully get it out with all due deliberate speed we’re shooting for possibly july 1st and from then on we will continue the process moffatt presented several additional documents after a brief discussion hoang agreed to stipulate these documents as well the court then advised and prompted as follows the court okay so based on that presentation there should be no difficulty here in the stipulation mr moffatt i encourage you pursuant to the tax_court rules to proceed informally now there is counsel in the case -- mr moffatt yes sir the court -- and if you want other matters agreed to or stipulated to present those documents have discussion about them rather than file motions with the court because i don’t think you really need them here mr moffatt i wouldn’t have thought it was necessary either today your honor the court okay mr moffatt thank you very much the court on that basis mr moffatt do you want to withdraw your motion mr moffatt i will do so the court okay well you can do that orally right now mr moffatt i’ll do that orally the court as soon as you ask for leave to withdraw your motion in limine the court will permit the motion to be withdrawn mr moffatt i ask for leave to withdraw the the court okay very good so it’s withdrawn motion thank you the transcript of these date proceedings does not indicate that days earlier ace had recommended that respondent concede the earned_income_credit issue on date ace asked respondent’s counsel’s office to prepare decision documents and stipulation documents to resolve the case also on date ace returned moffatt’s telephone call of friday may on date ace told moffatt that respondent’s paralegal was preparing the decision documents and stipulation documents at moffatt’s request ace said she would provide to moffatt an estimate of the interest on petitioner’s overpayment on date respondent’s counsel’s office told ace that she needed to consider the issue of petitioner’s request for attorney’s fees before the case could be completely resolved on date ace concluded that petitioner was not entitled to litigation costs because the counsel for the petitioner does not wish to participate in an appeals_conference so stipulated the record does not clarify whether it was intended that there be a linkage between the earned_income_credit issue and the litigation costs issue note that two of the five assignments of error supra text at note in the petition relate to petitioner’s claim for an award of reasonable_litigation_costs notwithstanding rule and the rules referred to therein note also petitioner’s statements set forth infra in d qualified_offer he wants to go directly to tax_court on date ace recommended that because moffatt will not sign the decision documents unless he is awarded attorney fees the case be forwarded to respondent’s counsel’s office for trial preparation the court having not received any filing from the parties after the date hearing described supra on date calendared the case for trial at the date session in los angeles on date petitioner filed a motion in limine similar to the one filed on date described supra on date the court conducted a telephone conference with the parties to discuss this motion the court’s order dated date states that as a result of the conference the court understood respondent intended to stipulate without reservation to certain documents that are the subject of the motion and that are described in the transcript of a hearing in this case held on date the court concluded that the stipulation procedure will better serve petitioner’s aims than the motion and so denied the motion in limine on date lorraine y wu hereinafter sometimes referred to as wu sent to moffatt a stipulation of facts in her cover letter wu noted that she would prepare a stipulation of settled issues which she would shortly send to moffatt moffatt responded on date moffatt agreed that the proposed stipulation of facts seems to mimic my past motions in limine however he brought up the following items he wanted respondent to agree to stipulate without reserved relevance objection a ace’s case activity record13 and b a date response to a foia freedom_of_information_act_request he had made he wanted to take ace’s deposition he was looking at filing a motion to transfer this case to the u s federal_court_of_claims sic given that the case is essentially a refund case and he wanted to meet with wu and her supervisor to discuss these issues at my office thereby satisfying the branerton requirements in branerton corp v commissioner sic t c on date wu sent to moffatt a proposed stipulation of settled issues agreeing that petitioner is entitled to the claimed earned_income_credit and that petitioner has made an overpayment of dollar_figure on date moffatt sent to wu a signed stipulation of facts in his cover letter moffatt repeated most of the points raised in his date letter to wu on date wu received petitioner’s trial memorandum on date wu served respondent’s trial memorandum on moffatt the relevant standing_pretrial_order in connection with the instant motion the parties have stipulated ace’s case activity record required the trial memoranda to be exchanged not less than days before the first day of the trial session on date at the calendar call the parties reported a basis of settlement they were ordered to submit decision documents by date the court received the decision documents and on date entered decision for petitioner that there was a dollar_figure overpayment for petitioner’s litigation costs motion was received after the court entered the parties’ stipulated decision in the exercise of its discretion the court sua sponte vacated the entry of decision so that petitioner’s motion could be considered and disposed of in the court’s decision of the instant case see rule f and directed that petitioner’s motion then be filed see eg 106_tc_76 when the answer was filed in the instant case respondent did not have any documentation supporting petitioner’s claimed earned_income_credit respondent first received such documentation as attachments to petitioner’s first motion in limine about months after the answer was filed respondent’s position in the instant case was substantially justified discussion we consider first respondent’s objections to receipt of certain exhibits then the general considerations regarding motions for litigation costs then whether respondent established that the position_of_the_united_states in the instant proceeding was substantially justified and then several of the other issues that the parties presented a evidence national_taxpayer_advocate report exhibit 22-p is publication 2104b national_taxpayer_advocate annual report to congress volume earned_income_tax_credit eitc audit_reconsideration study dated date exhibit 22-p is hereinafter sometimes referred to as the report respondent objects to receipt of the report on the ground of relevance petitioner’s position is that this report covers errors related to earned_income_tax_credit this documented error rate tends to prove errors occurred in petitioner’s case therefore relevancy is satisfied reproduced literally petitioner cites the report at numerous points in his legal memoranda to show that the irs regularly makes errors as to eic issues rule of the federal rules of evidence see sec_7453 provides the general_rule that all relevant evidence is admissible while evidence which is not relevant is not admissible rule of the federal rules of evidence14 provides that evidence is relevant if it has any tendency to make any fact of consequence more likely or less likely than it would be without the evidence in determining whether respondent’s position is substantially justified we come to a conclusion as to whether petitioner provided materials to respondent before date the date respondent’s answer was filed the accuracy of respondent’s records could affect our conclusion as to the existence of the fact of such providing especially in light of petitioner’s declaration on this point discussed infra c substantially justified what respondent knew this is clearly a fact that is of consequence to the determination of the action within the meaning of rule of the federal rules of evidence under these circumstances although we disagree with many of petitioner’s characterizations of what the report shows we conclude that the report is relevant we overrule respondent’s relevance objection and receive exhibit 22-p into evidence fed r evid definition of relevant evidence relevant evidence means evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence senatorial office press release exhibit 23-p is a date press release from the office of senator charles e schumer of new york which asserts that in respondent lost tax returns and other documents from about big_number people from upstate new york and new england the press release states that employees at a pittsburgh pennsylvania bank reportedly destroyed or hid thousands of tax documents because they felt they could not meet the irs’ processing deadlines respondent objects on the grounds of hearsay and relevance petitioner’s position is the document covers error related to lost documents similar in time to the documents petitioner claimed were lost by the irs as such this tends to prove the irs looses sic documents on occasion which satisfies the relevancy requirement as to the hearsay objection petitioner directs our attention to all or part of rule sec_801 b and of the federal rules of evidence the statements as to matters of fact asserted in exhibit p relate to documents lost years before the events we deal with in the instant case by an office some big_number miles from respondent’s offices in the instant case and lost because a private contractor’s employees were concerned about deadlines imposed on them by respondent the matter dealt with in exhibit 23-p is so remote from any fact that is of consequence to the determination of the action before us that we conclude exhibit 23-p fails even the broadly permissive test of rule of the federal rules of evidence see also fed r evid we sustain respondent’s relevance objection to exhibit 23-p and so need not deal with respondent’s hearsay objection b in general the congress has provided for the awarding of litigation costs to a taxpayer who satisfies a series of requirements sec dollar_figure sec_7430 provides in pertinent part as follows sec_7430 awarding of costs and certain fees a in general --in any administrative or court_proceeding which is brought by or against the united_states in connection with the determination collection_or_refund_of_any_tax interest or penalty under this title the prevailing_party may be awarded a judgment or a settlement for-- reasonable_litigation_costs incurred in connection with such court_proceeding b limitations -- requirement that administrative remedies be exhausted --a judgment for reasonable_litigation_costs shall not be awarded under subsection a in any court_proceeding unless the court determines that the prevailing_party has exhausted the administrative remedies available to such party within the internal_revenue_service c definitions --for purposes of this section-- continued continued prevailing_party -- a in general --the term prevailing_party means any party in any proceeding to which subsection a applies -- i which-- i has substantially prevailed with respect to the amount in controversy or ii has substantially prevailed with respect to the most significant issue or set of issues presented and ii which meets the requirements of the 1st sentence of section d b of title united_states_code b exception if united_states establishes that its position was substantially justified -- i general_rule --a party shall not be treated as the prevailing_party in a proceeding to which subsection a applies if the united_states establishes that the position_of_the_united_states in the proceeding was substantially justified c determination as to prevailing_party -- any determination under this paragraph as to whether a party is a prevailing_party shall be made by agreement of the parties or-- ii in the case where such final_determination is made by a court the court continued in general the requirements of sec_7430 are in the conjunctive ie the taxpayer must satisfy each of them in order to succeed see 124_tc_286 affd without published opinion 192_fedappx_212 4th cir 123_tc_202 respondent concedes that petitioner substantially prevailed sec_7430 and met the net_worth requirements sec_7430 respondent contends petitioner should not be treated as the prevailing_party because respondent’s position was substantially justified sec_7430 petitioner failed to exhaust available administrative remedies sec_7430 petitioner continued court proceedings --the term court_proceeding means any civil_action brought in a court of the united_states including the tax_court position of united_states --the term position_of_the_united_states means-- a the position taken by the united_states in a judicial proceeding to which subsection a applies and b the position taken in an administrative_proceeding to which subsection a applies as of the earlier of-- i the date of the receipt by the taxpayer of the notice of the decision of the internal_revenue_service office of appeals or ii the date of the notice_of_deficiency unreasonably protracted proceedings sec_7430 and the amount of costs petitioner claims is not reasonable and petitioner neither paid nor incurred the claimed costs subsecs a and c of sec_7430 we consider first whether respondent’s position was substantially justified c substantially justified to recover costs from respondent petitioner must establish he is the prevailing_party within the meaning of sec_7430 petitioner has satisfied the requirements of sec_7430 substantially prevailed and net_worth however under sec_7430 petitioner shall not be treated as having satisfied the prevailing_party requirement if respondent establishes that the position_of_the_united_states in the proceeding was substantially justified although the overall burden_of_proof as to prevailing_party is on petitioner the statute itself places on respondent the burden_of_proof on the substantially justified element see discussion in fla country clubs inc v commissioner 122_tc_73 affd 404_f3d_1291 11th cir respondent contends that petitioner did not respond to the date letter petitioner did not provide any supporting documentation in response to the notice_of_deficiency before respondent’s answer was filed and this court should not believe petitioner’s declaration that in date petitioner sent appropriate documentation to respondent accordingly respondent concludes when respondent took a position in the proceeding respondent’s position was substantially justified based on what respondent knew at that time in his opening legal memorandum petitioner states as follows b the position advanced by the respondent was substantially unjustified by the facts that five children were dependants of petitioner to deny the two eic deductions when five children were involved petitioner believes was both unjustified and based on red lining the area in which petitioner lives respondent petitioner contends was on notice of the error when petitioner called respondent’s service_center on more than one occasion respondent in documents already in front of this court indicated a recommendation for qualification of eic as to petitioner as of petitioner also submitted an affidavit claiming documents were supplied to fresno service_center only recently has petitioner discovered an audit as to fresno showing of reviewed cases of disallowed eic credits had documents in them supporting eic allowance this same report exhibit p22 showed fresno service_center as having the highest error rate with over error rate compared to other service centers processing eic petitioner has obtained a document supplied by respondent showing the word document on it although mis-spelled at or near the time petitioner claims documents were supplied to the fresno service_center petitioner requested depositions to be authorized by this court to examine the word document and or the absence of it and the use and recollection of statements made by irs reps to petitioner’s counsel this request was denied petitioner instead was forced on relying on respondent obtaining statements regarding this mis-spelled word in petitioner’s transcript not surprisingly respondent’s examination of supposed witnesses produced no smoking gun or even a recollection of comments regarding petitioner’s case which took place prior to petitioner discovering the p22 showing error rates that are so staggering that if those same error rates were done in private industry and an individual was forced to suffer because of the error rate civil and criminal charges would have flown from the egregiou sec_54 error rate and of viewed cases having documentation supporting eic qualification reproduced literally in his answering legal memorandum petitioner states as follows petitioner has alleged the government’s position was not substantially justified all agree that d b requires a fee applicant to allege that the government’s position was not substantially justified 541_us_401 it is not petitioner’s responsibility to prove it was in fact substantially justified only to allege that respondent was not substantially justified in this case the claim respondent was not substantially justified has already been made which is described in the below paragraphs petitioner’s motion for legal costs dated stated in of the brief that the dynamics of the committee report versus the statute in this recitation petitioner covered the magic words of substantially unjustified petitioners have been apprised that respondent has conceded the case and a judgment was issued in favor of petitioner as such petitioner’s have substantially prevailed on the issue this satisfies the litigation element of code sec_7430 and the prevailing element under the congressional committee report on p l the committee reports seem to reflect an intent that one be permitted to recover fees and costs any time the irs has issued a 30-day_letter this however differs from statute which states that the substantially unjustified position_of_the_united_states must be asserted as of the date of the receipt by the taxpayer of the notice of the decision of the irs appeals_office or the date of the notice_of_deficiency irs code c in item of petitioner’s motion for legal costs dated petitioner alleged respondent was substantial unjustified the position advanced by the united_states was substantially unjustified by the facts that children were involved to deny the two earned_income deductions when this many children were involved petitioner believes was both unjustified and based on red lining the area in which petitioner lives reproduced literally we agree with respondent that his position in this litigation was substantially justified substantially justified is defined as justified to a degree that could satisfy a reasonable person and having a reasonable basis both in law and fact 487_us_552 internal quotation marks omitted although the dispute in 487_us_552 arose under the provisions of the equal_access_to_justice_act eaja u s c sec d the relevant provisions of this part of the eaja are almost identical to the language of this part of sec_7430 109_tc_227 continued huffman v commissioner 978_f2d_1139 n 9th cir affg in part revg in part and remanding tcmemo_1991_144 respondent’s position may be incorrect and yet be substantially justified if a reasonable person could think it correct pierce v underwood u s pincite n whether respondent acted reasonably in the instant case ultimately turns on the available information which formed the basis for respondent’s position as well as on the law relevant to the instant case 94_tc_685 the fact that respondent eventually loses or concedes a case does not by itself establish that respondent’s position is unreasonable 108_tc_430 however it is a factor that may be considered idem in determining whether respondent’s position was substantially justified the question is whether respondent knew or should have known that the government’s position was invalid continued n accordingly we consider the holding in pierce v underwood supra to be applicable to the case before us also the substantially justified standard is not a departure from the reasonableness standard of pre-1986 law huffman v commissioner 978_f2d_1139 9th cir affg in part revg in part and remanding tcmemo_1991_144 accordingly we consider the holdings of pre-1986 law on reasonableness to be applicable to the case before us except as to the question of which party has the burden_of_proof at the time that respondent took the position in the litigation coastal petroleum refiners v commissioner t c pincite ordinarily we identify the point at which the united_states is first considered to have taken a position determine what that position was and then decide whether that position taken from that point forward was or was not substantially justified maggie management co v commissioner t c pincite ordinarily the position_of_the_united_states in the proceeding in this court is the position respondent sets forth in the answer huffman v commissioner f 2d pincite8 maggie management co v commissioner t c pincite summary and conclusions for purposes of sec_7430 the position_of_the_united_states in the proceeding in this court is the position respondent took in the answer--that is petitioner was not entitled to the earned_income_credit petitioner had not provided the requested documentation to support his claimed earned_income_credit and respondent did not have information as to the truth of petitioner’s factual assertions as to petitioner’s eligibility for the earned_income_credit by the time respondent filed the answer respondent did not have any documentation supporting petitioner’s claimed earned_income_credit we do not believe petitioner himself provided such documentation we do not believe petitioner provided such documentation through moffatt until the first motion in limine about months after the answer was filed we conclude respondent’s position was substantially justified at the time the answer was filed and respondent timely conceded the case after receiving the documentation attached to petitioner’s motion in limine as a result we conclude respondent’s position in the litigation was substantially justified within the meaning of sec_7430 we consider first what was the position_of_the_united_states that respondent has the burden of proving was substantially justified then we consider what respondent knew when respondent took that position then we consider whether that position was substantially justified respondent’s position in light of the foregoing the position_of_the_united_states in the instant case is the position respondent took in the answer filed on november dollar_figure in the notice_of_deficiency respondent’s explanation for the earned_income_credit disallowance is since you did not petitioner contends that the position_of_the_united_states in the instant case is the position taken in the notice_of_deficiency in the instant case as shown infra the answer in effect embraced the notice_of_deficiency it is not clear to us why petitioner appears to reject the maggie management approach on the record in the instant case neither our analysis nor our conclusion would be different if we were to adopt petitioner’s approach see 108_tc_430 establish that you were entitled to the earned_income_credit we disallowed it the petition’s assignments of error include the following b petitioner provided the requested documentation to the internal_revenue_service to support his claim of the earned_income_credit c petitioner responded to requests for information within the time deadlines requested by the internal_revenue_service sic in the answer respondent denied these assignments of error respondent also denied for lack of present information petitioner’s numerous assertions of fact as to the basis for his claimed earned_income_credit thus respondent’s position at the time of the answer was petitioner was not entitled to the earned_income_credit petitioner had not provided the requested documentation to support his claimed earned_income_credit and respondent did not have information as to the truth of the petition’s factual assertions as to petitioner’s eligibility for the earned_income_credit ultimately respondent conceded error on the first part of this position ie respondent conceded that petitioner was entitled to the earned_income_credit and in the full amount petitioner had claimed on his tax_return this concession came about after petitioner provided documentation to support his claim we proceed to consider what respondent knew as to the earned_income_credit issue by date what respondent knew on date shortly after petitioner’ sec_2002 tax_return was filed supra note respondent notified petitioner that his tax_return was being examined the date letter asked for certain information and documentation petitioner does not contend that respondent already had the information and documentation at the time of the date letter the parties have stipulated that petitioner failed to respond to the date letter respondent issued the notice_of_deficiency on date petitioner first consulted with moffatt on date and retained moffatt on date the petition was filed on date the answer was filed on date respondent referred the case to the appeals_office on date supra note more than weeks later the appeals_office notified petitioner that the office had his case and suggested petitioner contact ace on date petitioner brought the appeals_office letter to moffatt supra note on date moffatt called someone from respondent on date petitioner filed a motion in limine that included documentation which resulted in ace’s recommending on date that respondent should concede the earned_income_credit issue we conclude and we have found that when the answer was filed respondent did not have any documentation supporting petitioner’s claimed earned_income_credit and respondent first received such documentation as attachments to petitioner’s first motion in limine about months after the answer was filed in arriving at this conclusion we have taken into account the stipulated declaration18 by petitioner under penalty of perjury under the laws of the state of california as follows iv on or about date i sent by united_states mail to the internal_revenue_service located in fresno california the following document at the request of internal_revenue_service all five of my children’s birth certifications all five of my children’s school records lease agreement on the property that i was renting my fiancée and our five children and utility bills which included electricity home gas bills and cable reproduced literally firstly the date letter was indeed a request of the internal_revenue_service for relevant documents but the parties have stipulated that petitioner failed to respond to although the declaration is marked exhibit 21-r the stipulation designates it as exhibit 21-p the 21-r marking is obviously a typographic error that has no effect on our considerations the date letter the date letter stated in several places that petitioner should respond by the notice_of_deficiency was issued on date and petitioner proceeded promptly thereafter to consult and then retain moffatt to represent him in this matter petitioner has not identified any other request of the internal_revenue_service to which he might have been responding on or about date secondly in order to believe that petitioner provided the documents to respondent as stated in his declaration it appears that we also have to believe that petitioner had the documents in late date when he retained moffatt and either a petitioner did not then give the documents to moffatt or b petitioner did then give the documents to moffatt but moffatt chose to sit on the documents for many months until early date when the first motion in limine was fileddollar_figure petitioner’s statement in his declaration that he mailed the indicated documents to respondent on or about date does not ring true see eg 93_tc_643 ndollar_figure we have also attempted to take into account petitioner’s contention in his opening legal memorandum as follows moffatt’s hourly itemization shows that his first contact with respondent apart from a freedom_of_information_act_request was a relatively brief telephone call to irs on date petitioner has obtained a document supplied by respondent showing the word document on it although mis-spelled at or near the time petitioner claims documents were supplied to the fresno service_center petitioner requested depositions to be authorized by this court to examine the word document and or the absence of it and the use and recollection of statements made by irs reps to petitioner’s counsel this request was denied petitioner instead was forced on relying on respondent obtaining statements regarding this mis-spelled word in petitioner’s transcript reproduced literally we have searched in vain for a document supplied by respondent showing the word document on it although mis- spelled based on notes of telephone conferences the court held with counsel for the parties we surmise that petitioner intends to refer to stipulated exhibit 3-j a transcript of petitioner’ sec_2002 tax account entitled ‘imf mcc transcript - specific’ based on these notes we further surmise that the item petitioner intends to refer to is the following dollar_figure hc3 arc-002-071 intd pc corresponddt- credit dt- refund statute control dt- amd clms dt- cis mf ind-o csed- in his answering legal memorandum petitioner asserts as follows petitioner has submitted documentation indicating he has submitted proof orally as well as in writing respondent has claimed that the misspelled word document on petitioner’s file has no basis to the fact petitioner submitted documents while not showing credibly through deposed witnesses how the word could have arrived on petitioner’s file petitioner was denied subpoena power of representatives at the irs whom had previously conveyed to petitioner’s counsel that this record could only be accomplished by and a direct result of receiving correspondence from petitioner as a direct result of petitioner attempting to satisfy substantiation that he in fact had five children reproduced literally firstly date the date of the item we understand petitioner to be directing our attention to is days after respondent issued the notice_of_deficiency days after petitioner first consulted moffatt and day after petitioner retained moffatt moffatt did not provide the documents to respondent by date supra note in order to believe that this item shows that on date respondent received the documents from petitioner it appears that we also would have to believe that either a petitioner did not tell moffatt that he had just sent the documents to respondent or b petitioner did tell this to moffatt but moffatt did not then memorialize this information in a declaration by petitioner20 but instead let the supposed communication slip until moffatt noticed the item on the stipulated exhibit that respondent provided to moffatt later during the course of preparing the stipulations and exhibits in connection with the instant litigation costs motion as noted supra the stipulated declaration by petitioner is that he sent the documents to respondent on or about date secondly petitioner asserts that two of respondent’s employees had previously conveyed to petitioner’s counsel that this record presumably the date entry could only be accomplished by and a direct result of receiving correspondence from petitioner and that petitioner could have shown this if he had been allowed to depose these employees the parties have stipulated declarations by these two employees under penalties of perjury pursuant to u s c section one employee gerald r franco declares that a the indicated document_locator_number and transaction code show that a notice was generated by the internal_revenue_service to the taxpayer b they do not show that correspondence was received by the internal_revenue_service from the taxpayer and he cannot explain the term corresponddt- but he can state that this notation does not indicate the receipt of correspondence from a taxpayer the other employee barbara m deleo declares that she is a customer service representative her records show that she spoke on the telephone with someone about petitioner’s case but that she has no recollection of having had this telephone conversation or of what was said that she is not familiar with the type of document the imf mcc transcript - specific and does not know the meaning of the term corresponddt- and my statement in a teleconference with moffatt and wu that it could indicate correspondence sent in to the internal_revenue_service was only intended as a possibility we noted in a telephone conference with counsel for the parties that neither petitioner nor moffatt stated that either of them had sent anything to respondent at such a time that respondent would have received it on or about date in light of the timing the notice_of_deficiency and the absence of any notation in moffatt’s hourly itemization showing a communication to respondent around this time it seemed highly unlikely that respondent received documents from petitioner on date and deposition of these two employees of respondent would most probably be merely an unproductive fishing expedition adding to an already extraordinary cost of this dollar_figure case--a cost of litigating the motion for costs and not of litigating the case we commented that if a request for depositions were to be made and opposed then we would most likely not order the depositions presumably in reliance on that expression by the court petitioner did not formally institute further discovery by depositions on this point we also have taken into account petitioner’s contention in his opening legal memorandum respondent petitioner contends was on notice of the error when petitioner called respondent’s service_center on more than one occasion however petitioner does not enlighten us as to where in the record there is support for the statement that petitioner called respondent’s service_center when those calls or any of them were made or even what information or documentation was provided by petitioner to respondent during or as a result of those calls from the foregoing we conclude that by date when the answer was filed respondent had no more information than what was on petitioner’s tax_return and had none of the requested documentation or any other documentation that might have enabled respondent to conclude that petitioner was entitled to the claimed earned_income_credit as best we can tell from the record before us it was not until petitioner filed the first motion in limine on date that respondent received the appropriate documentation substantially justified ordinarily taxpayers who claim credits are obligated when challenged to show that they are entitled to the credits that they claim petitioner failed to respond to respondent’s request for documents to show his entitlement to the claimed earned_income_credit under these circumstances respondent was justified in taking the position that petitioner was not entitled to this credit cf 290_us_111 rule a on date petitioner finally provided documentation by the unorthodox in this court device of a motion in limine although the road thereafter was bumpy on date wu sent to moffatt a proposed stipulation of settled issues agreeing that petitioner is entitled to the claimed earned_income_credit and that petitioner had made an overpayment of dollar_figure in essence respondent conceded the case respondent’s position--that petitioner was not entitled to the claimed earned_income_credit unless petitioner could show he was so entitled--was substantially justified when petitioner finally did provide the requested documentation--more than months after respondent first asked for it and more than months after respondent filed the answer in the instant case--respondent conceded the case months later it is evident that this delay is attributable in significant part to the aggressive postures presented by those who spoke for both parties nevertheless the delay was not unreasonably long see eg cases collected at 92_tc_760 we conclude and we have found that respondent has successfully carried the burden of establishing that the position_of_the_united_states in the instant judicial proceeding was substantially justified on answering legal memorandum petitioner argues as follows the burden of establishing that the position_of_the_united_states was substantially justified d a indicates and courts uniformly have recognized must be shouldered by the government respondent has not shown how in light of lost documents in fresno related to eic cases as well as the worst error rate in the country over wrong eic assessments respondent has at the mere threshold indicated how its position was substantially justified reproduced literally petitioner’s reference is to the report supra a evidence national_taxpayer_advocate report apart from our unwillingness to accept petitioner’s characterization of what the report concludes we hold it is not unreasonable for respondent to maintain respondent’s position as to a specific taxpayer and not concede the case until that taxpayer has presented the documentation to show that that taxpayer is entitled to the credit that that taxpayer has claimed on that taxpayer’s tax_return in the instant case respondent was justified in maintaining the position that petitioner was not entitled to the claimed earned_income_credit until petitioner provided documentation showing that he was entitled to that credit it follows that petitioner although he substantially prevailed sec_7430 is not the prevailing_party sec_7430 and so petitioner is not entitled to an award of reasonable_litigation_costs under sec_7430 we so hold d qualified_offer notwithstanding the foregoing conclusory statement a taxpayer may nevertheless be treated as the prevailing_party if the taxpayer satisfies the qualified_offer provisions of subsections c e and g of sec_7430 in his motion for an award of reasonable_litigation_costs petitioner contended as follows petitioner’s filing of their petition stating that an eic was available satisfies the qualified_offer requirements if any needed to obtain litigation costs the petition itself satisfies notice to the director of the irs that the petition was requesting litigation costs the fact that the appeals_office made an internal ruling that petitioner’s deserved the eic credit and yet respondent’s counsel failed to follow that position satisfies the point that petitioners availed themselves of the appeal process satisfies the appeal element with respect to requesting legal fees and costs reproduced literally in a telephone conference petitioner’s counsel informally indicated that his contentions as to the qualified_offer provisions were in error and that claim was no longer part of the dispute in the instant casedollar_figure in his opening legal memorandum petitioner revisits the issue stating as follows compare eg 122_tc_124 affd 461_f3d_1162 9th cir with downing v commissioner tcmemo_2005_73 item e regarding the requirement of sec_7430 that the document he designated at the time it is made as a qualified_offer for purposes of this section the petition did not include such a designation also rule b provides that a claim for litigation costs shall not be included in the petition in a deficiency or liability action so that the petition filing could not constitute a qualified_offer finally sec_7430 provides that the qualified_offer alternative is not available to any judgment issued pursuant to a settlement the instant case has been settled respondent contends that petitioner failed to satisfy the qualified_offer requirement amazingly if petitioner goes down that path of qualified_offer according to irs bulletin feb t d awards of attorney feeds and other costs based upon qualified offers if a qualified_offer had been made and accepted attorney fees would not be awarded as such why would anyone ever want to submit a qualified_offer when the position of respondent is not to pay legal fees upon such a request even though case law provides for such an award reproduced literally substantially the same statement appears in petitioner’s answering legal memorandum the qualified_offer provision allows a taxpayer that is not a prevailing_party under any other provision of this paragraph sec_7430 to nevertheless be treated as a prevailing_party to some extent if the taxpayer has made a qualified_offer the case was not settled and the taxpayer’s liability ends up as less than or equal to the liability under the qualified_offer accordingly the qualified_offer provision does not remove benefits that a taxpayer would otherwise be entitled to the provision rather adds a possibility of a benefit where the taxpayer would otherwise not be entitled to any award also the provision appears to be designed to encourage the commissioner to take seriously any taxpayer settlement offer see discussion in 117_tc_48 affd 55_fedappx_476 9th cir in the instant case the qualified_offer provisions do not provide an alternate route to prevailing_party status see supra note also petitioner’s efforts to raise the qualified_offer provision were so clearly inappropriate and poorly conceived and petitioner’s determination to further discuss the issue in both legal memoranda was so wasteful that if we had otherwise determined to award litigation costs then we would determine how much of moffatt’s charged time was allocable to this diversion and disallow the charges for that time e other matters the foregoing resolves the litigation costs dispute and requires denial of petitioner’s motion but the parties have presented numerous additional matters that may usefully be commented on failure to exhaust available administrative remedies respondent contends that petitioner failed to exhaust available administrative remedies in that a petitioner failed to respond to the date letter or otherwise act file a protest or ask for an appeals_conference before the notice_of_deficiency was issued and b after the case was docketed petitioner refused to participate in an appeals_conference petitioner contends sec_7430 provides that in order to recover litigation costs a taxpayer must have taken advantage of available administrative remedies the regulations to this section include within this requirement participation in an appeals_office conference see sec_301_7430-1 it is undisputed that upon receiving the results of the irs audit petitioner’s counsel had a conference with the appeals_division cynthia ace petitioner also contends a a request for legal fees is valid at the administrative level b respondent refused to settle the case unless petitioner waived litigation costs c respondent was arguably also in violation of rra as it relates to a lack of fairness to petitioner and d the tax_court should correctly determine that petitioner did in fact exhaust the administrative remedies available to him 55_fedappx_476 we agree with petitioner’s conclusion even though we disagree with petitioner’s analysis sec_7430 supra note prohibits the awarding of litigation costs under subsection a in the instant case unless the court determines that petitioner exhausted the administrative remedies available to him within the internal_revenue_service we assume petitioner refers to the internal_revenue_service restructuring and reform act of publaw_105_206 112_stat_685 sec_3101 of that act stat pincite makes numerous amendments to different parts of sec_7430 but we have not found any amendments made by that act to sec_7430 relating to the requirement of exhaustion of administrative remedies and petitioner has not directed our attention to any such amendments nor has petitioner directed our attention to any specific provision of that act which extends for pages in the statutes at large that bears on our consideration of the requirement of exhaustion of administrative remedies even though his reference to rra appears in the portion of his answering legal memorandum headed petitioner exhausted administrative remedies petitioner has the burden_of_proof on this issue in his second legal memorandum petitioner points to the requirements of sec_301_7430-1 proced admin regs and states that moffatt had a conference with ace and this constituted compliance with the requirements of that regulation the cited regulation provides as follows i the party prior to filing a petition in the tax_court or a civil_action for refund in a court of the united_states including the court of federal claims participates either in person or through a qualified_representative described in sec_601_502 of this chapter in an appeals_office conference the first communication between moffatt and ace was on date months after date when the petition was filed plainly petitioner did not participate in an appeals_office conference either in person or through moffatt prior to filing a petition in the tax_court and so petitioner has not complied with the requirements of sec_301_7430-1 proced admin regs as to petitioner’s additional contentions items a and b seem to relate to the charge that respondent refused to settle the tax case unless petitioner waived any litigation cost claim although petitioner makes the charge petitioner does not direct our attention to any affidavit or other evidence in the record supporting the charge ace’s case activity record exhibit 8-j indicates that moffatt told her that he would not agree to a settlement unless respondent conceded an award of litigation costs on this state of the record we do not conclude that petitioner’s contentions a and b justify ruling for petitioner on the exhaustion of administrative remedies issue as we have noted supra note petitioner’s contention c relating to the internal_revenue_service restructuring and reform act of does not add anything to the force of his argument finally we are mystified by petitioner’s citation of the haas associates opinion in which the court_of_appeals for the ninth circuit affirmed our holding that the taxpayer therein was not entitled to an award of litigation costs notwithstanding our rejection of all of petitioner’s contentions we conclude that petitioner does qualify under sec_301_7430-1 proced admin regs which provides as follows f exception to requirement that party pursue administrative remedies if the conditions set forth in paragraphs f f f or f of this section are satisfied a party’s administrative remedies within the internal_revenue_service shall be deemed to have been exhausted for purposes of sec_7430 in the case of a petition in the tax court-- i the party did not receive a notice_of_proposed_deficiency 30-day_letter prior to the issuance of the statutory notice and the failure to receive such notice was not due to actions of the party such as a failure to supply requested information or a current mailing address to the district_director or service_center having jurisdiction over the tax matter and ii the party does not refuse to participate in an appeals_office conference while the case is in docketed status as respondent concedes petitioner did not receive a 30-day_letter respondent contends this failure was because he petitioner failed to supply the supporting information requested in the date letter as we have detailed in our findings supra text at note the date letter amounted to eight pages of detailed directions on four different forms plus a copy of publication the 3-year limitations_period would not expire for almost months we conclude that applying sec_301 f i proced admin regs to the facts of the instant case petitioner’s failure to receive the 30-day_letter was not due to petitioner’s actions but to respondent’s determination to shortcut the process it would not be appropriate to allow respondent to cut off petitioner’s possible entitlement to benefits by a requiring a 30-day_letter and b refusing to issue a 30-day_letter when there was ample time almost months to do so we next consider sec_301_7430-1 proced admin regs in applying this provision to the instant case we take into account the definitions that appear in sec_301_7430-1 and proced admin regs as follows participates for purposes of this section a party or qualified_representative of the party described in sec_601_502 of this chapter participates in an appeals_office conference if the party or qualified_representative discloses to the appeals_office all relevant information regarding the party’s tax matter to the extent such information and its relevance were known or should have been known to the party or qualified_representative at the time of such conference tax matter for purposes of this section tax matter means a matter in connection with the determination collection_or_refund_of_any_tax interest penalty addition_to_tax or additional_amount under the internal_revenue_code these definitions apply by their terms to the entire section and so apply to sec_301_7430-1 proced admin regs in the instant case ace had received all relevant information regarding the party’s petitioner’s tax matter by the time of her date telephone call with moffatt although there were disputes regarding dependency deductions and litigation costs the determination of petitioner’s tax under the internal_revenue_code could be--and indeed was--resolved by the information and documents that ace had already received albeit indirectly from petitioner from the foregoing we conclude that petitioner has carried the burden of proving that he satisfied the requirements of the regulation as to exhaustion of administrative remedies see corson v commissioner t c pincite swanson v commissioner t c pincite-dollar_figure paid_or_incurred awards of costs and fees under sec_7430 are limited to reasonable_litigation_costs incurred the attorney fee component is specifically limited to fees paid_or_incurred sec_7430dollar_figure petitioner does not contend that sec_7430’s exception for pro bono services applies to the instant case respondent contends that petitioner has not established that he has actually paid his attorney or is otherwise liable to his attorney for payment of the litigation costs claimed petitioner responds by citing provisions of the equal_access_to_justice_act and asserts that here the actual time and rate at which time and expenses were owed was provided as such the request for legal fees is valid petitioner does not assert that he paid to moffatt any of the costs claimed in the motion 106_tc_76 interprets sec_301_7430-1 proced admin regs that paragraph e was redesignated paragraph f by t d par 2003_1_cb_693 accordingly the swanson analysis applies now to paragraph f of that regulation not all fee-shifting statutes are so limited see discussion in 87_tc_838 see also 27_f3d_436 9th cir before us the instant dispute then is whether petitioner incurred any of the costs in order for petitioner to incur a litigation cost within the meaning of sec_7430 he has to have a legal_obligation to pay that cost 122_tc_272 swanson v commissioner t c pincite the corresponding language of eaja has also been interpreted to include that requirement 908_f2d_1407 8th cir petitioner does not direct our attention to and we have not found anything in the record that shows that petitioner is legally obligated to pay to moffatt the claimed substantial amounts the mere fact that a taxpayer retained counsel who in fact represented the taxpayer in a proceeding in this court is not sufficient to meet this incurred requirement of sec_7430 see grigoraci v commissioner t c pincite and cases there cited we have not been favored with any evidence as to the agreement between petitioner and moffatt we are not willing to assume that petitioner and moffatt entered into an enforceable agreement which obligates petitioner to pay to moffatt the claimed substantial amounts in order to prosecute a dollar_figure case we conclude that petitioner has failed to carry his burden of proving that he incurred the claimed moffatt attorney fees within the meaning of sec_7430 the congress has not created a roving commission to do justly rather the congress enacted a statute that provides for the awarding of costs if but only if it has been shown that the requirements of the statute are met compare eg fla country clubs inc v commissioner t c pincite with downing v commissioner tcmemo_2005_73 accordingly even if we had determined that petitioner were the prevailing_party there would not be a basis in the record for the allowance of any amount of litigation costs the parties have locked horns on numerous other matters in connection with petitioner’s motion we have examined their contentions and concluded that no matter how we resolved any specific contention none of them would affect the bottom line as to petitioner’s motion an appropriate order and decision will be entered denying petitioner’s motion for litigation costs as supplemented and deciding that there is no deficiency and there is an overpayment in the amount claimed on petitioner’s tax_return


o f f i c e o f t h e c h i e f c o u n s e l department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c date cc intl b02 genin-124642-18 number release date uil --------------------- ------------------------ ------------------------------ reference pfic -- passive foreign investment companies dear -------------------- we are responding to your recent inquiry regarding whether you can recover approximately ---------------paid to irs in ------- on the sale of your interest in a passive_foreign_investment_company pfic pfic rules were enacted in to address concerns regarding u s investors in foreign_corporations and their ability to defer income and recharacterize ordinary_income as income from capital_gains we do not have all the facts in your situation however you can take the following steps to verify that you properly reported your pfic transaction determine the portion if any of the gain that was attributable to years in which the investment was not considered a pfic based on available information this amount would be the portion of the gain attributable to the period from the date of purchase until you became a u s resident for u s tax purposes if the investment was held in a retirement account then you should consult the united_states income_tax treaty with the -----------------------to determine if there are income_tax treaty provisions would apply to the investment the income_tax treaty can be found at the irs gov website https www irs gov businesses international-businesses united-states-income- tax-treaties-a-to-z if either of the first two steps above results in a change in the way you reported the transaction on your tax_return you should complete and file an amended_return form 1040x to claim a refund genin-124642-18 with regard to the question on pfic annual information statements pfics are not required to issue this statement annually if you have additional questions please contact me at --------------------- sincerely by _________________________ jeffery g mitchell branch chief branch international


internal_revenue_service number release date index number -------------------------------------------------- -------------------------- --------------------- ------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-118836-09 date date ----------------------------------------------------------------------------------------- x ------------------------------------------------------------------------------------------------------------ -------------------------------------------------- state d1 d2 trust ---------------------------------------------------------- -------------------------------------------------- -------------------- -------------------- -------------------------- ----------------------------------------------------------------------------------------- dear ----- -------------- this responds to a letter dated date submitted on behalf of x by its authorized representative requesting a ruling under sec_1362 of the internal_revenue_code x was formed under the laws of state and elected to be an s_corporation effective d1 on d2 shares of x were transferred to trust x represents that trust qualified to be an electing_small_business_trust esbt within the meaning of sec_1361 however no election was made under sec_1361 to treat trust as an esbt trust consequently was an ineligible shareholder and as a result x’s s_corporation_election terminated on d2 x represents that the termination was not motivated by tax_avoidance or retroactive tax planning x and its shareholders have agreed to make any adjustments that the commissioner may require consistent with the treatment of x as an s_corporation sec_1361 defines an esbt sec_1361 provides that except as provided in sec_1361 an esbt means any trust if i such trust does not have as a beneficiary any person other than i an individual ii an estate iii an organization described in sec_170 or or iv an organization described in sec_170 which holds a contingent_interest in such trust and is not a potential_current_beneficiary plr-118836-09 ii no interest in such trust was acquired by purchase and iii no election under sec_1361 applies to such trust sec_1361 provides that an election under sec_1361 shall be made by the trustee any such election shall apply to the taxable_year of the trust for which made and all subsequent taxable years of such trust unless revoked with the consent of the secretary sec_1_1361-1 of the income_tax regulations provides that the trustee of the esbt must make the esbt election by signing and filing with the service_center where the s_corporation files its income_tax return a statement that meets the requirements of sec_1 m ii sec_1362 provides in part that if an election under sec_1362 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under sec_1362 or the secretary determines that the circumstances resulting in the ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the ineffectiveness or termination steps were taken a so that the corporation is a small_business_corporation or b to acquire the shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in the ineffectiveness or termination the corporation will be treated as an s_corporation during the period specified by the secretary based solely on the facts submitted and the representations made we conclude that the termination of x’s s_corporation_election on d2 was inadvertent within the meaning of sec_1362 we further hold that pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation from d2 and thereafter provided x’s s_corporation_election was valid and provided that the election was not otherwise terminated under sec_1361 the shareholders of x must include their pro-rata share of the separately_stated and nonseparately computed items of x as provided in sec_1366 make any adjustments to basis as provided in sec_1367 and take into account any distributions made by x as provided in sec_1368 this ruling is further contingent upon the trustees of trust filing an esbt election effective d2 with the appropriate service_center and the trust filing amended returns for taxable years beginning d2 and thereafter consistent with the treatment of the trust as an esbt the esbt election and the amended returns must be filed within days following the date of this letter and a copy of this letter should be plr-118836-09 attached to any such elections or returns if x or its shareholders fail to treat themselves as described above this ruling is null and void except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed on whether x was or is otherwise eligible to be treated as an s_corporation or whether trust is eligible to be an esbt this ruling is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file a copy of this letter is being sent to x’s authorized representative sincerely melissa c liquerman chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number -------------------------- --------------------------------- ---------------------------- ------------------------------- legend x department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-153874-06 date date ------------------------------------------- --------------- ------------------------ country d1 dear ------------------ this is in response to a letter dated date and subsequent correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election to be classified as a disregarded_entity for federal tax purposes facts the information submitted states that x was acquired in country on d1 as an entity eligible to make a classification election x’s default status was as an association_taxable_as_a_corporation for federal tax purposes x intended to be classified as a disregarded_entity for federal tax purposes effective d1 however a form_8832 entity classification election for x to elect to be treated as disregarded effective d1 was not timely filed plr-153874-06 law and analysis sec_301_7701-2 generally provides that a business_entity is any entity recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the internal_revenue_code sec_301_7701-3 provides that an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301 b or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 further provides that so long as a business_entity is not classified as a corporation under sec_301_7701-2 or - an eligible_entity it may elect its classification for federal tax purposes sec_301_7701-3 provides that unless the entity elects otherwise a foreign eligible_entity is an association if all members have limited_liability except as provided in sec_301_7701-3 sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing a form_8832 with the appropriate service_center under sec_301_7701-3 this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the date specified on form_8832 cannot be more than days prior to the date on which the election is filed and cannot be more than months after the date on which the election is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election with a deadline prescribed by a regulation published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that request for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government plr-153874-06 conclusion based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly x is granted an extension of sixty days from the date of this letter to elect to be classified as a disregarded_entity for federal tax purposes effective d1 the election should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the election except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent sincerely william p o’shea associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes