Tax Court Awards Partial Litigation Costs to Taxpayer’s Attorney

Posted on November 21, 2016

In a recent case before the United States Tax Court, the taxpayer asked the Court to award litigation fees to him because he prevailed in his case against the IRS.

The IRS had previously denied the taxpayer’s dependency exemptions and the taxpayer’s attorney attempted to persuade the IRS that those exemptions should be allowed. The IRS continued to disallow the dependency exemptions and subsequently issued a Notice of Deficiency.

The taxpayer then sued the IRS in the United Stated Tax Court and the IRS completely conceded the case at that point. The taxpayer then brought a motion for litigation fees as the prevailing party. Under Internal Revenue Code §7430, a judgment for reasonable litigation or administrative costs can be awarded to a taxpayer if he or she is the prevailing party, has exhausted his or her administrative remedies with the IRS and did not unreasonably protract the proceedings.

To be a prevailing party, the taxpayer must substantially prevail with respect to either the amount in controversy or the most significant issue or set of issues presented, and satisfy the applicable net worth requirement. The taxpayer can still be denied attorneys fees if the IRS shows that its position was substantially justified.

Although the taxpayer asked for more than $11,000.00 in attorneys fees, the Tax Court awarded attorneys fees and administrative costs amounting only to $2,120.00. Do you have a problem with the IRS? Contact us, we can help.