                         T.C. Memo. 2006-103



                       UNITED STATES TAX COURT



               BRADLEY K. MORRISON, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 18140-03.                Filed May 15, 2006.



     William E. Taggart, Jr., for petitioner.

     Patricia Montero, for respondent.



                         MEMORANDUM OPINION


     VASQUEZ, Judge:    This case is before the Court on

petitioner’s motion for award of litigation costs and related

costs pursuant to section 7430 and Rule 231.1    We see no reason



     1
        All references to sec. 7430 are to that section of the
Internal Revenue Code as amended and in effect, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
                                - 2 -

for an evidentiary hearing on this matter.     See Rule 232(a)(2).

Accordingly, we rule on petitioner’s motion on the basis of the

parties’ submissions and the existing record.    See Rule

232(a)(1).   The portions of our opinion on the merits in the

instant case, Morrison v. Commissioner, T.C. Memo. 2005-53

(Morrison), that are relevant to our disposition of this motion

are incorporated herein by this reference.

     After concessions2, the issues for decision are: (1) Whether

petitioner paid or incurred any attorney’s fees; (2) whether

respondent was substantially justified in his position before

petitioner made his qualified offer; (3) whether petitioner

unreasonably protracted the proceedings; and (4) whether the

costs claimed are reasonable.

                             Background

     Respondent issued a notice of deficiency to petitioner on

July 24, 2003, determining the following deficiencies in and

accuracy-related penalty on petitioner’s Federal income taxes:

                                  Penalty
     Year       Deficiency      Sec. 6662(a)

     1999        $87,780        $17,556
     2000          4,075           –-




     2
        Respondent concedes that petitioner qualifies as a
prevailing party based on the qualified offer made on or about
Apr. 5, 2004, meets the net worth requirement, and exhausted all
administrative remedies.
                               - 3 -

     Petitioner timely petitioned this Court for redetermination

based on respondent’s notice of deficiency.   Respondent filed an

answer with this Court.

     Petitioner submitted a qualified settlement offer to

respondent in which petitioner offered to settle the case for an

increase in petitioner’s income tax liability for 1999 in the

amount of $100 and for an increase in petitioner’s income tax

liability for 2000 in the amount of $117.   Respondent did not

accept this qualified offer.

     The issues for decision in Morrison were:   (1) Whether

payments made on behalf of petitioner or disbursements directly

to petitioner by Caspian Consulting Group, Inc.3 (Caspian),

during 1999 and personal charges petitioner made on a company

credit card in 2000 were constructive dividends; and (2) whether

petitioner was liable for an accuracy-related penalty under

section 6662(a) for 1999.

     On March 23, 2005, this Court filed a memorandum opinion

finding for petitioner, that the 1999 payments and disbursements

and the 2000 personal charges were loans and not constructive

dividends.   Therefore, there were no deficiencies in tax for

petitioner for the years 1999 and 2000 except for the item




     3
        Petitioner owned 40 percent of the outstanding stock of
Caspian Consulting Group, Inc., a C corporation.
                               - 4 -

petitioner conceded before trial.4     Additionally, this Court

found that there is no underpayment of tax for 1999 on which a

penalty may be imposed.

     Petitioner filed a motion for award of litigation costs and

related costs.   Petitioner seeks to recover either: (1)    The

litigation costs incurred from the date of respondent’s issuance

of the notice of deficiency to petitioner through the date of

this Court’s issuance of its opinion, March 23, 2005, and related

costs, or (2) the litigation costs incurred for professional

services from the date petitioner made a qualified offer of

settlement, April 5, 2004, through the date of this Court’s

issuance of its opinion, March 23, 2005, and related costs.

Caspian has agreed to pay all litigation costs incurred on behalf

of petitioner, and Caspian is entitled to be reimbursed out of

any recovery of litigation costs that petitioner receives.

     Petitioner also seeks to recover the costs incurred as a

result of bringing the motion for award of litigation costs and

related costs.   Moreover, petitioner seeks to recover the costs

incurred as a result of preparing the reply to respondent’s

opposition to petitioner’s motion for award of litigation costs

and related costs.




     4
        Petitioner conceded before trial that he had failed to
report $227 of income on his 2000 return.
                                 - 5 -

                           Discussion

     Section 7430 provides for the award of litigation costs

incurred in connection with a court proceeding brought against

the United States involving the determination of any tax,

interest, or penalty pursuant to the Internal Revenue Code.     An

award of litigation costs may be made where the taxpayer (1) is

the “prevailing party”, (2) exhausted available administrative

remedies, (3) did not unreasonably protract the judicial

proceeding, and (4) claimed reasonable litigation costs.    Sec.

7430(a), (b)(1), (3), and (c).    These requirements are

conjunctive, and petitioner has the burden of establishing that

all of these requirements have been satisfied.    See Rule 232(e);

Minahan v. Commissioner, 88 T.C. 492, 496-497 (1987).

     For the reasons stated below, we find it unnecessary to

address whether the position of the respondent was substantially

justified in this matter, whether petitioner unreasonably

protracted the proceedings, or whether the costs claimed are

reasonable.

Petitioner Must Pay or Incur Fees and Costs

     A party’s award for litigation costs is limited to the costs

that the party actually paid or incurred.    Sec. 7430(a)(2),

(c)(1)(B)(iii); Foothill Ranch Co. Pship. v. Commissioner, 110

T.C. 94, 101 (1998)(holding that a partner may receive an award

for litigation costs only to the extent such fees paid by the
                                 - 6 -

partnership are allocable to that partner); Frisch v.

Commissioner, 87 T.C. 838, 846 (1986); Republic Plaza Props.

Pship., T.C. Memo. 1997-239 (holding that a taxpayer is not

entitled to litigation costs where the taxpayer is not obligated

to pay any of the litigation costs at issue);         Thompson v.

Commissioner, T.C. Memo. 1996-468 (holding that a wife cannot be

awarded litigation costs that were paid by her husband).        We have

defined the word “incur” as “to become liable or subject to:

bring down upon oneself.”     Frisch v. Commissioner, supra at 846.

     Petitioner concedes that Caspian agreed to pay all

litigation costs incurred on behalf of petitioner, and petitioner

did not pay any litigation costs.    Because Caspian, a separate

entity, paid all litigation costs in issue, petitioner did not

“bring down upon” himself any debt.       We therefore cannot award

costs to petitioner because petitioner did not actually pay or

incur any litigation costs.    See Grigoraci v. Commissioner, 122

T.C. 272 (2004); Foothill Ranch Co. Pship. v. Commissioner,

supra.

     To reflect the foregoing,


                                              An appropriate order will

                                         be issued.
