Opinion ID: 6743
Heading Depth: 2
Heading Rank: 1

Heading: LITIGATION COSTS UNDER Sec. 7430

Text: 24 Section 7430 allows a prevailing party (other than the United States or any creditor of the taxpayer involved) in tax proceedings to recoup reasonable litigation costs, including attorney's fees. 9 For a taxpayer to be a prevailing party, however, she must meet several statutory requirements. In the instant case, the IRS has conceded that Taxpayer has satisfied all statutory requisites except one: that the position of the United States in the proceeding was not substantially justified. 10 25 In determining whether the government's position is substantially justified under Sec. 7430, we draw on our longer experience with the Equal Access to Justice Act (EAJA). 11 Borrowing from the jurisprudence under the EAJA, we have stated that [t]he position of the United States is substantially justified if it is 'justified to a degree that could satisfy a reasonable person.'  12 It is not enough that a position simply possesses enough merit to avoid sanctions for frivolousness; it must have a 'reasonable basis both in law and fact.'  13 We have noted, however, that the standard is not as lenient as the standard presently governing fee awards in Title VII cases. 14 26 Although the fact that, virtually on the courthouse steps, the IRS conceded its case in the underlying litigation does not compel an award of costs, the outcome of the lawsuit remains a factor to be considered. 15 Still, [t]he burden of proving no substantial justification [remains] with the taxpayer[ ]. 16 27 In the instant case, the Tax Court concluded that Taxpayer failed to establish that the positions taken by the IRS were not substantially justified, as (1) the IRS' Notice to Taxpayer, in which the IRS asserted a position inconsistent with that taken in the Notice to Mr. Boyle, was necessary to protect the public fisc; (2) the IRS' position that Taxpayer possessed an immediately taxable community property interest in the renewal commissions was based on the 1983 judgment of a Louisiana court; (3) the IRS conceded its position within a short time after receiving new evidence (the expert's opinion) that clarified the misleading terminology in the 1983 judgment; and (4) Taxpayer cited no authority on the proper Federal tax treatment of income generated by former community assets of a former Louisiana marital community, the Tax Court thus was not satisfied that federal law on the treatment of such income was settled. We review these rulings for abuse of discretion. 17 Accordingly, we will reverse only if we have a definite and firm conviction that an error of judgment was committed. 18 We review the Tax Court's subsidiary findings of fact for clear error. 19