DocketNumber: No. 11763-06
Judges: Kroupa
Filed Date: 11/3/2008
Status: Non-Precedential
Modified Date: 4/18/2021
MEMORANDUM OPINION
KROUPA,
We are asked to decide whether petitioners are entitled to recover litigation costs. We hold that they are not.
Petitioners reside in California. Respondent issued petitioners a Letter 566-B EZ (30-day letter), notifying petitioners that respondent was examining their income tax return for 2004, specifically with respect to the claimed dependency exemptions and child tax credit. *244 The 30-day letter requested documentation to support petitioners' claiming exemptions and credits for three children listed on the return for 2004 and informed petitioners that respondent would issue a deficiency notice if petitioners failed to provide the necessary documentation.
Petitioners timely submitted additional documentation, including school records for the children showing the children's address as petitioners' address, the entry of judgment finalizing petitioner wife's divorce from her ex-husband, and the marital settlement agreement giving sole physical custody of the three children to petitioner wife.
Respondent mailed petitioners a Letter 692 on March 6, 2006, stating that even though respondent had received petitioners' earlier mailing, petitioners still needed to provide additional information to claim the three dependency exemptions and the child tax credit. Respondent gave petitioners 15 days to submit this additional information. The letter also advised petitioners that they could appeal the proposed changes to the Appeals Office and included a copy of Publication 3498-A, The Examination Process, which explained how to appeal respondent's proposed determination.
Petitioners neither provided more information within the 15-day period nor made an appeal or protest to the Appeals Office. Respondent issued a deficiency notice on April 17, 2006, disallowing the three dependency exemptions *245 and the child tax credit. Petitioners did not request an Appeals Office conference or file a protest before the deficiency notice was mailed, nor did they participate in an Appeals Office conference before filing the petition with this Court.
Respondent conceded, after petitioners filed the petition with this Court, that petitioners owed no deficiency. Petitioners filed a motion for reasonable litigation costs seeking $ 4,916 in fees paid to their attorney, $ 60 in court costs, and an additional $ 10,084 in fees that they have not yet paid their attorney but which they seek from the Court. Discussion We now address whether petitioners may recover any of the $ 15,060 in litigation costs. The prevailing party may be awarded reasonable litigation costs in any court proceeding by or against the United States. A threshold requirement exists for the recovery of litigations costs. The taxpayer must have exhausted the available administrative remedies before filing a petition. The Appeals Office's mission "is to resolve tax controversies, without litigation." 4 Administration, Internal Revenue Manual (CCH), pt. 8.1.1.1(1), at 27,003 (Oct. 23, 2007). The Internal Revenue Service is seeking facts during the Appeals phase to decide whether it should determine a deficiency and thereby force a taxpayer to incur litigation costs or pay the tax. See, e.g., We have considered all the arguments of the parties, and, to the extent we have not addressed them, we find them to be irrelevant, moot, or meritless. We hold that petitioners did not exhaust their administrative remedies by participating in an Appeals Office conference, and, therefore, petitioners are not entitled to an award of litigation costs. Accordingly, we need not, nor do we, address whether petitioners satisfied any of the remaining requirements of To reflect the foregoing,
1. All section references are to the Internal Revenue Code, and all Rule references are to the Tax Court Rules of Practice and Procedure, unless otherwise indicated.↩
2. Petitioners still mistakenly believe that respondent's deficiency notice denied the earned income credit (EIC). Petitioners did not seek the EIC for 2004.
3. Petitioners did not file an additional affidavit containing detailed information regarding fee arrangements, hours spent, etc., as required by