                       T.C. Memo. 2003-275



                     UNITED STATES TAX COURT



                 PATRICIA P. KEAN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent

               ROBERT W. KEAN, III, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent*



     Docket Nos. 8966-00, 9144-00.   Filed September 22, 2003.



          R determined deficiencies for H’s 1995 and 1996
     taxable years. R’s determinations were based upon R’s
     inconsistent position that payments made by H to W,
     pursuant to pendente lite unallocated support orders,
     were includable in the gross income of W as alimony
     received, and not deductible by H as alimony paid. H
     filed a petition for redetermination. This Court held
     that the payments were alimony for Federal income tax
     purposes and were deductible by H, under sec. 215,
     I.R.C. H seeks recovery of litigation costs pursuant
     to sec. 7430, I.R.C., in the amount of $54,012.63.



     *
      This opinion supplements our previously filed opinion in
Kean v. Commissioner, T.C. Memo. 2003-163.
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          Held: R’s position that the payments made by H to
     W were not deductible by H as alimony paid was
     substantially justified, within the meaning of sec.
     7430(c)(4)(B)(i), I.R.C. H is not entitled to recover
     litigation costs.


     Alan R. Adler, for petitioner in docket No. 8966-00.

     Jeffrey M. Garrod and Eugenia Yudanin, for petitioner in

docket No. 9144-00.

     Joseph J. Boylan, for respondent.



                  SUPPLEMENTAL MEMORANDUM OPINION


     NIMS, Judge:     This matter is before the Court on petitioner

Robert W. Kean III’s Motion for Award of Reasonable Litigation

Costs, pursuant to section 7430 and Rule 231.    Respondent

objects.   Unless otherwise indicated, all section references are

to the Internal Revenue Code in effect at all relevant times, and

all Rule references are to the Tax Court Rules of Practice and

Procedure.

     Petitioner Robert W. Kean III (Mr. Kean) seeks to recover

litigation costs in the amount of $54,012.63 incurred in

connection with respondent’s determination of deficiencies with

respect to his Federal income tax liabilities for his 1995 and

1996 taxable years.    The issues for decision are whether the

position of the United States in the judicial proceeding was

substantially justified for the purposes of section 7430, and if
                               - 3 -

not, whether Mr. Kean meets the net worth requirements, and

whether the litigation costs Mr. Kean seeks are reasonable.    Mr.

Kean resided in Far Hills, New Jersey, when he filed his

petition.

                            Background

     The underlying claim that gave rise to the present dispute

involved whether any part of the unallocated support payments

(disputed payments) paid by Mr. Kean to petitioner Patricia P.

Kean (Ms. Kean) constitutes alimony under section 71 that is

deductible by Mr. Kean, under section 215, and includable in the

gross income of Ms. Kean, under sections 61(a)(8) and 71(a).    In

the notices of deficiency, and in the answers filed by

respondent, respondent took inconsistent positions, disallowing

the deductions to Mr. Kean and requiring Ms. Kean to report

alimony income.   On brief, however, respondent argued that Mr.

Kean should be allowed to deduct the disputed payments and Ms.

Kean should report the disputed payments as income.

     This Court rendered Kean v. Commissioner, T.C. Memo. 2003-

163, deciding that the disputed payments were alimony for Federal

income tax purposes.

                            Discussion

     Section 7430 provides for the award of litigation costs to a

taxpayer in a court proceeding brought against the United States

involving the determination of any tax, interest, or penalty
                                - 4 -

pursuant to the Internal Revenue Code.    An award of litigation

costs may be made where the taxpayer (1) is the “prevailing

party”, (2) has exhausted available administrative remedies, (3)

did not unreasonably protract the administrative or judicial

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

7430(a), (b)(1), (3), (c).    Respondent concedes that Mr. Kean

exhausted available administrative remedies and did not

unreasonably protract the administrative or judicial proceeding.

       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, at the

time the petition in the case is filed, the taxpayer must meet

certain net worth requirements.    Sec. 7430(c)(4)(A).   Section

7430(c)(4)(B) provides that a taxpayer shall not be treated as

the prevailing party in any proceeding if the United States

establishes that its position in the proceeding was substantially

justified.    The position of the United States in a deficiency

proceeding in this Court is that set forth in the Commissioner’s

answer.    Maggie Mgmt. Co. v. Commissioner, 108 T.C. 430, 442

(1997); see also sec. 7430(c)(7)(A).

       For purposes of section 7430, a position of the United

States is substantially justified if it has a reasonable basis in

both law and fact.    Maggie Mgmt. Co. v. Commissioner, supra at

443.    The determination of the reasonableness of that position is
                                - 5 -

based upon the available facts that formed the basis for the

position, as well as any controlling legal precedent.    Id.   The

fact that the Commissioner ultimately concedes an issue does not,

by itself, establish that his prior position with respect to that

issue was unreasonable.   Id.   However, it is a factor that may be

considered.   Id.

     As an initial matter, respondent argues that he is “entitled

to take inconsistent positions against former spouses in the

alimony context.”   We agree with respondent.   Inconsistent

determinations may be made against the former spouses in order to

protect the revenue in a “whipsaw” situation.    See Doggett v.

Commissioner, 66 T.C. 101, 103 (1976); Marten v. Commissioner,

T.C. Memo. 2000-186; Ryan v. Commissioner, T.C. Memo. 1999-109.

Inconsistent positions were appropriate in this case.

     Respondent cites Gonzales v. Commissioner, T.C. Memo. 1999-

332, as justification for the position taken in his answer that

the payments made by Mr. Kean were not alimony.    Based on the

particular facts in Gonzales, this Court held that the

unallocated support payments there did not constitute alimony

under section 71.   As in the instant case, the payments in that

case were made pursuant to an order of a New Jersey court, and

this Court applied New Jersey law in its determination as to

whether the payments constituted alimony under section 71.
                               - 6 -

     In the case before us, Mr. Kean made payments to Ms. Kean

pursuant to a series of orders from a New Jersey court, and this

Court applied New Jersey law in its determination as to whether

the disputed payments constituted alimony pursuant to section 71.

Ultimately, this Court distinguished the facts of Gonzales from

the facts of the instant case, and determined that the disputed

payments in the instant case were alimony.   Nonetheless, based on

the fact that Gonzales and the instant case both involve

unallocated support payments and interpretation of New Jersey

law, respondent’s reliance on Gonzales to frame his answer in the

instant case was substantially justified.

     Based on the facts available to respondent, as well as the

legal precedent regarding the deductibility of unallocated

support payments, specifically this Court’s holding in Gonzales

v. Commissioner, supra, respondent’s position in his answer had a

reasonable basis in both law and fact, and therefore was

substantially justified.

     Because respondent’s position in the judicial proceeding was

substantially justified, Mr. Kean is not deemed to be a

prevailing party as defined in section 7430(c)(4).   Consequently,

Mr. Kean is not entitled to recover any of his claimed costs

under section 7430.   As a result of this holding, we need not

address the questions of whether Mr. Kean meets the net worth
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requirements and whether the litigation costs Mr. Kean seeks are

reasonable.

     To reflect the foregoing,


                                         An appropriate order will be

                                 issued denying the motion for award

                                 of reasonable litigation costs.
