                        T.C. Memo. 1997-546



                      UNITED STATES TAX COURT



                CHARLES F. URBAUER, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 5323-95.                 Filed December 11, 1997.



     Charles F. Urbauer, pro se.

     Mark I. Siegel, for respondent.


                        MEMORANDUM OPINION

     RAUM, Judge:   The instant matter is before us on

petitioner's motion for reasonable administrative and litigation

costs pursuant to section 74301 and Rule 231.    Neither party has

requested a hearing on petitioner's motion.     Accordingly, we rule

     1
        Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
                               - 2 -


on petitioner's motion on the basis of the parties' submissions

and the record in the instant case as a whole.   We incorporate by

reference herein the portions of our opinion on the merits in

this case, Urbauer v. Commissioner, T.C. Memo. 1997-227, that are

relevant to our disposition of the motion.

     On May 13, 1997, we issued our opinion on the substantive

issues in the instant case.   Pursuant to their divorce,

petitioner and his ex-wife sold their marital home.   They entered

into an agreement under which the ex-wife was responsible for

paying the taxes due from the sale of the marital home.    No joint

return was filed by petitioner and his ex-wife for the year in

which the house was sold.   We found that, despite their

agreement, since the divorce court did not change the result of

the operation of Michigan law, petitioner owned a one-half

interest in the house and was responsible for half the taxes due.

In the notice of deficiency, the Commissioner determined that

petitioner owed taxes on 50 percent of the gain from the sale.

However, in ill-advised reliance on Friscone v. Commissioner,

T.C. Memo. 1996-193, the Government reduced its claim to only 25

percent of the taxes due on the gain.   Accordingly, we held that

petitioner was charged with tax on 25 percent of the gain from

the sale of the family residence.

     Generally, section 7430(a) provides for the award of

reasonable administrative and litigation costs to a taxpayer who
                                - 3 -


is a prevailing party in an administrative or court proceeding

brought against the United States involving the determination of

any tax, interest, or penalty pursuant to the Code.    Section

7430(c)(4)(A) requires that to be a "prevailing party", a

taxpayer must establish that:   (1) The position of the United

States was not substantially justified; (2) the taxpayer

substantially prevailed with respect to either the amount in

controversy or the most significant issue or set of issues

presented; and (3) the taxpayer meets the net worth requirements

of 28 U.S.C. sec. 2412(d)(2)(B) (1994).   Section 7430(b)(1)

provides that an award of litigation costs may be made only where

a taxpayer has exhausted available administrative remedies.      No

award of costs may be made with respect to any portion of an

administrative or judicial proceeding that the taxpayer has

unreasonably protracted, sec. 7430(b)(4), and the costs claimed

must be reasonable in amount.   Sec. 7430(c).   Petitioner bears

the burden of proving each of the above requirements has been

satisfied.2   Rule 232(e).

     2
        Sec. 7430 was amended by the Taxpayer Bill of Rights 2,
Pub. L. 104-168, sec. 701, 110 Stat. 1452, 1463-1464 (1996),
effective with respect to proceedings commenced after July 30,
1996. The amendments to the section place on the Commissioner
the burden of establishing that the position of the Commissioner
was substantially justified. Sec. 7430(c)(4)(B). A judicial
proceeding is commenced in this Court with the filing of a
petition. Rule 20(a). Petitioner filed his petition on April 6,
1995. Accordingly, the amendments to sec. 7430 enacted by the
Taxpayer Bill of Rights 2 do not apply here. Maggie Management
                                                   (continued...)
                                - 4 -


     Respondent contends that petitioner has not demonstrated

that the position of the United States was not substantially

justified or that the amounts claimed are reasonable.      Respondent

concedes that petitioner has satisfied the other requirements for

the award of reasonable litigation costs.      We shall first address

whether respondent's position was substantially justified.

     Respondent's position is substantially justified if it has a

reasonable basis in fact and law.       Powers v. Commissioner, 100

T.C. 457, 470 (1993).   The fact that the Commissioner loses or

concedes the case does not mean that the Government's position

was not substantially justified; however, it is a factor to be

considered.   Id. at 471.   To show lack of substantial

justification, petitioner must demonstrate "that the legal

precedent does not substantially support respondent's position

given the facts available to respondent."       Coastal Petroleum

Refiners, Inc. v. Commissioner, 94 T.C. 685, 688 (1990).

     Petitioner makes no substantive argument about the

authority, or lack thereof, for respondent's legal position.        He

seems to assume that since a decision was entered under Rule 155,

he is entitled to half the litigation and administrative costs.

"The judge in the Trial Hearing (pg. 3 of Petitioner's Brief)

suggested filing for Litigation and Administrative costs, if you


     2
      (...continued)
Co. v. Commissioner, 108 T.C. 430 (1997).
                                 - 5 -


win.    Both the IRS and Petitioner won 50%, therefore Petitioner

files for ½ of his costs & time."

       Even if petitioner had put forth a substantive argument, he

would not be entitled to administrative and litigation costs in

this case.    In the notice of deficiency, the Government took the

position that petitioner was liable for 50 percent of the taxes

due upon the sale of his marital home.    That position was taken

because petitioner and his wife jointly owned the home, and the

divorce court had not changed the ownership of the property in

the property settlement accompanying the divorce decree.     Under

Michigan law, unless the divorce decree provides otherwise, upon

their divorce, married property owners become tenants in common.

Mich. Stat. Ann. sec. 25.132 (Law. Co-op. 1992).

       Shortly before the case was submitted to the Court, the

Government conceded half of the deficiency relying, in error, on

Friscone v. Commissioner, T.C. Memo. 1996-193.     In Friscone, the

divorce court, constrained by a buy-sell agreement, divided

ownership of stock between two divorcing spouses beneficially, by

allocating the proceeds and the tax liability, rather than

directly.    Id.   We subsequently held that the stock should be

treated for tax purposes as though it had been divided outright.

Id.    The Government mistakenly believed that the private

agreement petitioner and his ex-wife entered into was entitled to

the same consideration.    In Urbauer v. Commissioner, T.C. Memo.
                                 - 6 -


1997-227, we noted that petitioner should have been liable for

the taxes on 50 percent of the gain.       However, since the

Government conceded 25 percent of the taxes due on the gain, we

held the Government to its concession.        Id.

     This case is unusual in that when the Government was seeking

the larger deficiency amount, its position was legally correct.

Its concession resulted in a windfall for petitioner; he avoided

liability for taxes he otherwise legally would have owed.        Given

the benefit to petitioner and given that the Court would have

held for the Government had it maintained its original position,

we hold that there was substantial justification for the

Government's position.   Since we find for the Government on that

issue, we need not consider whether the amounts claimed by

petitioner as administration and litigation costs were

reasonable.

     To reflect the foregoing,

                                              Petitioner's motion

                                         will be denied and order and

                                         decision will be entered in

                                         accordance with respondent's

                                         Rule 155 computation.
