Tax Court Denies Request for Attorneys Fees

Posted on March 26, 2015

In a recent Tax Court case, a taxpayer’s request for attorneys fees was denied because the Court held that the IRS’ position that the taxpayer had unreported income was justified.

The taxpayer late filed his tax returns for four years. The IRS subsequently issued a Notice of Deficiency alleging substantial unreported income not listed on the late filed tax returns. The taxpayer subsequently filed a Petition in the Tax Court disputing the alleged additional tax liability. The IRS and the taxpayer subsequently settled the case, with both sides conceding some of the issues. However, the IRS agreed that the taxpayer substantially prevailed in the Tax Court case. The taxpayer then filed a motion for attorneys fees seeking to recoup the fees he paid to his attorney in the Tax Court proceeding. After considering arguments on both sides, the Tax Court held in favor of the IRS, finding that its position was substantially justified. In making its decision, the Tax Court noted that the taxpayer transferred millions of dollars between accounts, did not adequately explain these transfers and failed to timely file his tax returns for the years at issue.

Do you think that taxpayer’s request for attorneys fees was properly denied in this case?