                           T.C. Memo. 2009-273



                          UNITED STATES TAX COURT



             RICHARD AND FIORELLA HONGSERMEIER, Petitioners v.
                COMMISSIONER OF INTERNAL REVENUE, Respondent



          Docket No. 29643-86.           Filed November 25, 2009.



          Michael Louis Minns and Enid M. Williams, for

petitioners.

          Henry E. O’Neill, for respondent.


                                  CONTENTS
Background     . . . . . . . . . . . . . . . . . . . . . . . . . . 8

    I.    Kersting Tax Litigation Through Dixon V Remand     . . . 8

    II.   Dixon V Remand Proceeding . . . . . . . . . . . . .       14

          A.     Houston Status Conference   . . . . . . . . . .    15

          B.     Los Angeles Status Conference and Thompson
                 Tax Records for Years Other Than 1979, 1980,
                 and 1981   . . . . . . . . . . . . . . . . . .     17
                                  - 2 -

             C.    Las Vegas Special Session     . . . . . . . . . .   17

           D.      Los Angeles Special Session    . . . . . . . . .    19

           E.      Washington, D.C., Special Session and
                   Petitioners’ Opening Brief . . . . . . . . . .      19

           F.      Our Determination of Scope of Thompson
                   Settlement and Awards of Appellate Fees     . . .   20

           G.      Minns’ Motion for Reconsideration     . . . . . .   21

     III. The Minns Law Office’s Dixon V Remand Proceeding Fee
          and Expense Requests . . . . . . . . . . . . . . . 22

Discussion      . . . . . . . . . . . . . . . . . . . . . . . . .      28

     I.    Application of Section 6673(a)(2)(B)        . . . . . . .   28

           A. General Rules     . . . . . . . . . . . . . . . . .      29

           B. Meaning of “Incurred” Under Section
              6673(a)(2)(B) . . . . . . . . . . . . . . . . .          30

     II.   Reasonable Hourly Rates . . . . . . . . . . . . . .         32

           A.      Minns’ and Williams’ Hourly Rates     . . . . . .   33

           B.      Paralegal’s and Secretary’s Hourly Rates . . .      35

     III. Hours Reasonably Expended . . . . . . . . . . . . .          36

           A.      Preliminary Comments . . . . . . . . . . . . .      37

           B.      Reasonably Related to Dixon V Remand
                   Proceeding . . . . . . . . . . . . . . . . . .      40

                   1.   Fees Incurred During Appeal of
                        Dixon III . . . . . . . . . . . . . . . .      40

                   2.   Collection, Bankruptcy, and Probate
                        Matters   . . . . . . . . . . . . . . . .      42

                   3.   Disciplinary Proceedings Against McWade and
                        Sims . . . . . . . . . . . . . . . . . . 44

                   4.   Freedom of Information Act Lawsuit     . . .   45
                                     - 3 -

                  5.    Client Relations     . . . . . . . . . . . .    45

                  6.    Motion for Reconsideration. . . . . . . .       49

                  7.    Entries Related to L. T. Bradt      . . . . .   50

                  8.    Entries Related to Joseph Nunan . . . . .       51

                  9.    Chapin Billing Dispute      . . . . . . . . .   51

                  10.   Closed Cases     . . . . . . . . . . . . . .    52

                  11.   Overhead Expenses . . . . . . . . . . . .       54

                        a.   Secretary’s Services     . . . . . . . .   55

                        b.   Overtime Air Conditioning . . . . . .      56

                  12.   Inadequately Described Entries      . . . . .   56

                  13.   Miscellaneous . . . . . . . . . . . . . .       58

                        a.    Minns’ Services    . . . . . . . . . .    58

                        b.   Williams’ Services . . . . . . . . .       65

                        c.   Paralegal Services . . . . . . . . .       67

                        d.   Total    . . . . . . . . . . . . . . .     68

                  14.   Total Reductions for Entries Not Reasonably
                        Related to Dixon V Remand Proceeding . . 68

          C.      Reliability of Documentation . . . . . . . . .        69

          D.      Duplicative and Excessive Efforts      . . . . . .    70

                  1.    Excessive Fees and Expenses . . . . . . .       71

                  2.    Reduction for Duplicative and Excessive
                        Efforts   . . . . . . . . . . . . . . . .       73

Conclusion     . . . . . . . . . . . . . . . . . . . . . . . . .        74
                               - 4 -
                        MEMORANDUM OPINION


     BEGHE, Judge:   This is the third opinion in our third set of

opinions on various petitioners’ applications for attorney’s fees

and expenses incurred in the Kersting tax shelter project

litigation after the discovery and disclosure of the misconduct

of respondent’s trial counsel in Dixon v. Commissioner, T.C.

Memo. 1991-614 (Dixon II), vacated and remanded per curiam sub

nom. DuFresne v. Commissioner, 26 F.3d 105 (9th Cir. 1994), on

remand Dixon v. Commissioner, T.C. Memo. 1999-101 (Dixon III),

revd. and remanded 316 F.3d 1041 (9th Cir. 2003) (Dixon V), on

remand Dixon v. Commissioner, T.C. Memo. 2006-90 (Dixon VI),

supplemented by Dixon v. Commissioner, T.C. Memo. 2006-190 (Dixon

VIII), on appeal (9th Cir., Dec. 28, 2006, and Jan. 3, 2007).

     In our first attorney’s fees opinion, Dixon v. Commissioner,

T.C. Memo. 2000-116 (Dixon IV) (supplementing Dixon III), we

awarded Kersting project petitioners attorney’s fees and expenses

under section 6673(a)(2)(B)1 for services in this Court rendered

by Attorneys Joe Alfred Izen, Jr. (Izen), Robert Allen Jones

(Jones), and Robert Patrick Sticht (Sticht) during the remand

from DuFresne.




     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years at issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
                               - 5 -
     In the second set of attorney’s fees opinions, Dixon v.

Commissioner, T.C. Memo. 2006-97 (Dixon VII), and Young v.

Commissioner, T.C. Memo. 2006-189, we responded to the

supplemental mandate of the Court of Appeals for the Ninth

Circuit to rule on Kersting project petitioners’ requests for

appellate attorney’s fees and expenses incurred in the Dixon V

appellate proceeding.   In Dixon VII we awarded appellate

attorney’s fees and expenses under section 7430 to Kersting

project petitioners represented in the Dixon V appeals by Porter

& Hedges Attorneys John R. Irvine (Irvine) and his partner, Henry

G. Binder (Binder), and by Michael Louis Minns (Minns).     In Young

we awarded appellate fees and expenses under section 7430 to

Kersting project petitioners represented in the Dixon V appeals

by Izen and Jones.

     This third set of opinions pertains to fees and expenses

incurred in this Court during the remand from Dixon V (Dixon V

remand proceeding),2 which resulted in Dixon VI, supplemented by

Dixon VIII, determining the terms and benefits of the Thompson




     2
      Respondent and petitioners represented by Sticht reached a
comprehensive settlement agreement regarding fees and expenses
incurred from 1992 through 2006, including the Dixon V remand
proceeding, which superseded our award to Sticht’s clients in
Dixon IV. On Oct. 4, 2006, we ordered respondent to disburse
$1,254,368.11 to Sticht’s clients in satisfaction of that
agreement. Of this amount, approximately $237,000 was
attributable to fees for the services of Sticht and his associate
in the Dixon V remand proceeding.
                               - 6 -
settlement.3   In our most recent opinions,   Dixon v.

Commissioner, 132 T.C. __ (2009) (Dixon IX), and Gridley v.

Commissioner, T.C. Memo. 2009-89 (Gridley II), we awarded fees

and expenses under section 6673(a)(2)(B) for the respective

services of Irvine, Binder, and other Porter & Hedges attorneys

and of Jones in the Dixon V remand proceeding.

     In this Memorandum Opinion we award fees and expenses under

section 6673(a)(2)(B) for services of Minns and his staff on

behalf of the Hongsermeier test-case petitioners and various non-

test-case petitioners in the Dixon V remand proceeding.    A later

opinion will deal with the pending motion of other Kersting test-

case and non-test-case petitioners to recover Izen’s fees and

expenses incurred in the Dixon V remand proceeding.

     Petitioners have submitted an amended request for $967,3794

in fees and $21,525.99 in expenses.    Respondent objects to the

hourly rates and number of hours claimed as unreasonable;

respondent requests substantial reductions.

    After considering petitioners’ amended request and

respondents’ objections to claimed hourly rates, we will reduce


     3
      Petitioners’ dockets were consolidated in the Dixon V
remand proceeding for the purposes of hearing, briefing, and
opinion with 26 other docketed cases of Kersting project
petitioners represented by Irvine, Izen, Jones, and Sticht.
     4
      Petitioners’ amended fee request states that petitioners
are requesting $967,362.21, whereas the total hours listed in
petitioners’ amended fee request multiplied by the claimed hourly
rates come to $967,379.
                               - 7 -
Minns’ hourly rate from $500 to $350 per hour and reduce the

claim for the services of his associate, Enid M. Williams

(Williams), from $250 to $175 per hour.   We will allow the

requested hourly rates of $100 and $75 per hour for services of a

paralegal and secretary.   The rate reductions alone would reduce

petitioners’ requested award by $285,363.75 ($229,993.50

attributable to Minns and $55,370.25 attributable to Williams) to

$682,015.25.5

     In response to respondent’s objections to specific items in

various categories of services, we will reduce petitioners’

requested award by a total of 736.89 hours for Minns, Williams,

the paralegal, and the secretary, amounting to an additional

$197,976.50 reduction of petitioners’ requested fee award, which

would leave petitioners a fee award of $484,038.75.

     In addition to the above fee reductions attributable to

respondent’s specific objections, we will reduce petitioners’ fee

award across-the-board by an additional one-third (33-1/3

percent) of the remaining fee amount, amounting to $161,346.25,

to reflect “overlawyering” and lack of contemporaneous

documentation.   After subtracting this percentage reduction, we

hold that petitioners are entitled to a fee award of $323,692.50.



     5
      Unless otherwise specified, all dollar amounts attributable
to Minns’ and Williams’ services have been calculated using
reduced rates of $350 per hour for Minns and $175 per hour for
Williams. See infra Discussion, Part II.
                               - 8 -
We also reduce petitioners’ requested expenses by $6,236.44,

leaving an expense award of $15,289.55.

                            Background

     The underlying facts in these cases are described in Dixon

II, Dixon III, Dixon IV, Dixon VI, Dixon VII, Young v.

Commissioner, T.C. Memo. 2006-189, Dixon VIII, Dixon IX, and

Gridley II.   The parties have provided additional facts in

petitioners’ fee request, as amended, and respondent’s

objections.   The parties have not requested an evidentiary

hearing, and we have found a hearing unnecessary.   Cf. Rule

232(a)(2).

I.   Kersting Tax Litigation Through Dixon V Remand

     The Kersting tax shelter litigation arose from respondent’s

disallowance of interest deductions claimed by participants in

tax shelter programs promoted by Henry F.K. Kersting (Mr.

Kersting) during the late 1970s and the 1980s.   Respondent’s

determinations of deficiencies against Kersting tax shelter

participants eventually resulted in the docketing of

approximately 1,800 cases in the Tax Court.   Most Kersting

project petitioners entered into “piggyback” agreements with

respondent in which they agreed that their cases would be

resolved in accordance with a small number of test cases.     The

Hongsermeiers were among the test-case petitioners.
                                - 9 -
    In Dixon II the Court upheld the deficiencies resulting from

Kersting tax shelter deductions claimed by the test-case

petitioners.   On June 9, 1992, after entry of the Court’s

decisions in Dixon II, respondent’s management discovered that

before trial respondent’s trial attorney, Kenneth W. McWade

(McWade), and his supervisor, Honolulu District Counsel William

A. Sims (Sims), had entered into secret settlement agreements

with test-case petitioners John R. and Maydee Thompson (the

Thompsons) and John R. and E. Maria Cravens (the Cravenses).

McWade and Sims had not disclosed the Thompson and Cravens

settlements to their superiors, the Court, or the other test-case

petitioners or their counsel.   The primary purpose and final

effect of the Thompson settlement was to provide the Thompsons

refunds more than sufficient to pay the fees of Luis G. DeCastro

(DeCastro), the Thompsons’ attorney, to provide the appearance of

independent representation of test-case petitioners in the

test-case trial.

     Respondent filed a motion for an evidentiary hearing to

determine whether the secret settlements had affected the Court’s

decisions in Dixon II.   The Court denied respondent’s motion for

an evidentiary hearing, entered decisions giving effect to the

Thompson and Cravens settlements, and allowed to stand the

decisions sustaining respondent’s adverse determinations against

the other test-case petitioners.   We also denied motions to
                              - 10 -
intervene in the Thompson and Cravens cases filed by Izen and

Sticht on behalf of certain test-case and non-test-case

petitioners.

     The test-case petitioners (other than the Thompsons and the

Cravenses) and the non-test-case petitioners seeking to intervene

appealed to the U.S. Court of Appeals for the Ninth Circuit.    The

Court of Appeals vacated our decisions in the test cases, holding

that an evidentiary hearing was needed to determine whether the

misconduct of respondent’s counsel had given rise to “a

structural defect voiding the judgment [in Dixon II] as

fundamentally unfair, or whether, despite the government’s

misconduct, the judgment can be upheld as harmless error.”

DuFresne v. Commissioner, 26 F.3d at 107.   The Court of Appeals

directed the Tax Court to hold such a hearing and to consider the

merits of all motions of intervention filed by affected parties.

In an unpublished opinion, Adair v. Commissioner, 26 F.3d 129

(9th Cir. 1994), the DuFresne panel (Goodwin, Ferguson, and

Trott, JJ.) affirmed our denials of the motions to intervene in

the Thompson and Cravens cases on the ground that those decisions

had become final.

     To give effect to the direction of the Court of Appeals in

DuFresne to consider the merits of all motions to intervene by

affected parties, we ordered the consolidation of 10 non-test-
                             - 11 -
cases with the remaining test cases for the evidentiary hearing,

briefing, and opinion required by the Dufresne mandate.

     In the course of that evidentiary hearing Izen

sought discovery of documents pertaining to respondent’s conduct

after the trial of the test cases.    Izen alleged, among other

things, that respondent after May 1992 tried to conceal the

fraudulent conduct of the Government attorneys in the test cases.

We denied Izen’s discovery requests, sustaining various

privileges asserted by respondent.    See Dixon III, PROCEDURAL

HISTORY OF EVIDENTIARY HEARING, III. Developments Following

Initial Evidentiary Hearing, C. Denial of Mr. Izen’s Motion To

Compel Production of Documents.

     After the evidentiary hearing we issued our opinion in Dixon

III, generally allowing the Court’s decisions in Dixon II to

stand and holding that McWade’s and Sims’ misconduct did not

create a structural defect that prejudiced the Court’s decision

in Dixon II but amounted to harmless error.   However, we imposed

sanctions against respondent by relieving test-case and non-test-

case petitioners of liability for (1) the interest component of

the addition to tax for negligence under former section 6653(a),

and (2) the increased interest attributable to the higher rate

prescribed in former section 6621(c).   See Dixon III.    On April

1, 1999, 2 days after issuance of our Dixon III opinion, we
                              - 12 -
referred the misconduct of McWade, Sims, and DeCastro to the Tax

Court’s Committee on Admissions, Ethics, and Discipline.

     In Dixon IV we imposed additional sanctions pursuant to

section 6673(a)(2)(B) by ordering respondent to pay attorney’s

fees of Kersting project petitioners to investigate and present

the evidence of McWade’s and Sims’ misconduct to the Court.    In

so doing, we reduced the awards of fees requested in Dixon IV by

one-third across-the-board to reflect various failures of proof.

     The test-case petitioners again appealed to the Court of

Appeals for the Ninth Circuit.   We also certified the cases of

non-test-case petitioners represented by Izen, Sticht, Jones, and

Declan J. O’Donnell (O’Donnell) for interlocutory appeal.    After

various procedural delays described more fully in Young v.

Commissioner, T.C. Memo. 2006-189, the Court of Appeals accepted

the interlocutory appeals of the nontest cases but held them in

abeyance pending resolution of the appeals of the test cases.

     In the meantime Minns replaced Izen as appellate attorney

for the Dixons, the DuFresnes, and the Hongsermeiers.   Later,

Irvine and Binder replaced Minns as appellate attorneys for the

Dixons and the DuFresnes.   Minns remained appellate attorney for

the Hongsermeiers, and Izen remained appellate attorney for the

Youngs and the Owenses and the Adair non-test-case petitioners.
                               - 13 -
     On January 17, 2003, another panel of the Court of Appeals

(D.W. Nelson, Hawkins, and Wardlaw, JJ.) issued Dixon V (amended

March 18, 2003), reversing Dixon III and remanding the test

cases.   The Court of Appeals held that the misconduct of the

Government attorneys was a fraud on the Court, for which no

showing of prejudice was required.      Dixon V, at 1046.   The Court

of Appeals directed us to extend the terms of the Thompson

settlement to “Appellants and all other taxpayers properly before

this Court”.   Id. at 1047.   The Court of Appeals left to our

discretion “the fashioning of such judgments which, to the extent

possible and practicable, should put these taxpayers in the same

position as provided for in the Thompson settlement.”       Id. n.11.

The Court of Appeals took no action on our denial of Izen’s

discovery requests.

     On March 14, 2003, another panel of the Court of Appeals for

the Ninth Circuit (Canby, O’Scannlain, and T.G. Nelson, JJ.)

remanded the nontest cases that had been appealed and held in

abeyance, directing further proceedings consistent with Dixon V.

     By January 23, 2003, Minns had began to pursue disciplinary

actions against McWade and Sims.   Following what he interpreted

as a suggestion or order by a member of the panel that heard oral

argument on the appeal that resulted in Dixon V, Minns filed

complaints that resulted in suspensions from practice of McWade
                               - 14 -
and Sims by the Oregon and Arkansas Bars, respectively, and the

IRS Office of Professional Responsibility.

      On February 20, 2004, the Tax Court, acting on the orders to

show cause and the recommendations of the Committee on

Admissions, Ethics, and Discipline, suspended McWade and Sims

from practice before the Court6 for 2 years.7   In February 2004,

the Arkansas State Bar suspended Sims’s license to practice law

for 1 year, and in August 2004, the Oregon State Bar suspended

McWade’s license to practice for 2 years.    On June 9, 2004, the

Director of the IRS Office of Professional Responsibility

suspended McWade and Sims from practice before the IRS for an

indefinite period.

II.   Dixon V Remand Proceeding

      On April 23, 2003, the Tax Court received the primary

mandate of the Court of Appeals (the primary mandate) vacating

Dixon III.8   The primary mandate required that we determine the

terms of the Thompson settlement and enter decisions that, “to


      6
      On July 14, 2003, the Tax Court had accepted DeCastro’s
resignation from the Tax Court bar.
      7
      On Oct. 9, 2007, and on Jan. 15, 2008, respectively, McWade
submitted a petition for reinstatement and a supplement thereto.
After a hearing and consideration of an additional supplement
submitted by McWade, the Court, in an order dated June 27, 2008,
denied McWade’s petition for reinstatement.
      8
      On June 2, 2003, the Court received the supplemental
mandate of the Dixon V panel, directing the Court to act on
petitioners’ appellate fee requests.
                              - 15 -
the extent possible and practicable”, would put Kersting project

petitioners in the same position as provided for in the Thompson

settlement.

     On April 30, 2003, respondent filed a motion for a status

conference.   On May 1, 2003, the Court ordered the parties to

file status reports by May 30.   By or around May 30, status

reports were received from all participating counsel, including

Minns.

     As described in the background statement of Dixon IX,

counsel for all represented petitioners informally agreed that

Porter & Hedges would, in effect, serve as lead counsel in the

Dixon V remand proceeding.   Through Binder, Porter & Hedges

played the lead role in presenting the petitioners’ case in the

Dixon V remand proceeding.

     A.   Houston Status Conference

     On July 7, 2003, we scheduled a status conference, to be

held in Houston on August 18, 2003.    On July 11, 2003, we

ordered the parties to file reports of their suggestions for

the agenda of that status conference.    By August 12, 2003,

counsel for the petitioners whose cases had been consolidated

for the Dixon V remand proceeding filed their reports.    O’Donnell

asserted in his report that Kersting project petitioners whose

cases had been closed by stipulated decisions (the closed cases)
                              - 16 -
should also be entitled to the benefit of the Thompson

settlement.9

     The Houston status conference lasted 2 days.    Minns appeared

and spoke on the first day of the conference.   Williams alone

attended the second day but had no occasion to speak.

     At the Houston status conference it became obvious that the

parties were in substantial disagreement about the terms of the

Thompson settlement.   Petitioners contended that the Thompsons

received tax benefits from the Thompson settlement that went

beyond the stated terms of the settlement and decision documents.

Petitioners also asserted that those benefits extended to taxable

years of the Thompsons other than 1979, 1980, and 1981, the

taxable years at issue in the Thompson test cases.




     9
      Several Kersting project petitioners whose cases had been
closed by stipulated decisions subsequently filed or attempted to
file motions for leave to file motions to vacate those decisions.
In Hartman v. Commissioner, T.C. Memo. 2008-124 (Hartman I),
reconsidering and superseding Lewis v. Commissioner, T.C. Memo.
2005-205, we held that the Thompson settlement sanction will be
imposed against respondent in the docketed cases of all Kersting
project petitioners in which stipulated decisions were entered on
or after June 10, 1985, the commencement date of the Court’s
Honolulu trial session at which the Court and representatives of
the parties agreed to use the test-case procedure. In Hartman v.
Commissioner, T.C. Memo. 2009-124 (Hartman II), we granted in
part motions for reconsideration insofar as they concern the
mechanics of implementing the sanctions against respondent in the
closed cases.
                              - 17 -
     B.    Los Angeles Status Conference and Thompson Tax Records
           for Years Other Than 1979, 1980, and 1981

     Because the parties could not agree on the terms and

benefits of the Thompson settlement, further evidentiary

proceedings were required; we scheduled another status conference

for September 5, 2003, in Los Angeles.   At this conference Jones

complained that respondent had failed to provide transcripts of

the Thompsons’ tax records.   Jones argued that these records were

needed to determine whether the terms and benefits of the

Thompson settlement extended beyond the years 1979, 1980, and

1981.

     C.    Las Vegas Special Session

     On April 13, 2004, we issued a scheduling order, setting the

first session of the evidentiary hearing for September 20, 2004,

in Las Vegas.   The order stated that the hearing was to be held

for the sole purpose of determining the terms of the Thompson

settlement.   The order further stated that neither appellate fees

nor the closed cases would be addressed during the evidentiary

hearing.

     On September 10, 2004, respondent’s counsel, Henry E.

O’Neill (O’Neill), informed petitioners that, on September 9,

2004, he had found the Thompsons’ tax records and returns for the

years 1983 through 1989.   Petitioners cited O’Neill’s delay in

providing these returns as further evidence of respondent’s
                               - 18 -
efforts to prevent disclosure of the full extent of respondent’s

former counsel’s misconduct.

     On September 20 through 22, 2004, the Court held the first

scheduled hearing session in Las Vegas.      The Thompson records

that O’Neill had found were received into evidence on the first

day of the hearing.

     Soon after the session began, Minns requested the Court’s

permission to leave at 11 a.m. on the second day of the session

so that he could attend other Federal court proceedings.        Minns

assured the Court that Williams would take his place for the

remainder of the session.   We granted Minns’ request.

     During the afternoon of the first day of the hearing

session, Minns requested the Court’s permission to allow Tom

Snell (Snell), an accountant, to take Minns’ seat at petitioners’

counsel’s table.   Minns explained that Snell,

whose expertise had been sought to establish evidence

supporting petitioners’ theories, would assist Binder with

matters related to accounting.   The Court allowed Snell to take

Minns’ seat at the counsel table, and Minns sat with the

audience.

     Williams attended the second and third days of the Las Vegas

hearing session in place of Minns.      Williams sat with the

audience and did not question any witnesses or otherwise appear

to participate actively in the proceeding.
                               - 19 -
     D.    Los Angeles Special Session

     Many factual issues remained unresolved after the Las Vegas

hearing session.   On October 6, 2004, the Court issued a

scheduling order continuing the hearing to November 22, 2004, in

Los Angeles.

     Williams rather than Minns attended the Los Angeles hearing

session.   Williams’ only active participation in the session

was signing a stipulation of facts on behalf of the Minns Law

Office.    Otherwise, she sat with the audience during the hearing.

     According to Williams’ timesheets, she spent more than 8

hours at the hearing and conferring with counsel on November 22

and more than 10 hours at the hearing and meeting with a client

on November 23.    The hearing session followed by a brief meeting

in chambers lasted no more than 4 hours on November 22.

     E.    Washington, D.C., Special Session and Petitioners’
           Opening Brief

     On February 3, 2005, petitioners through Binder filed a

motion for a third and final evidentiary hearing session.    On

February 4, 2005, we issued an order setting the final hearing

session to begin March 29, 2005, in Washington, D.C.

     On March 29, 2005, in Washington, D.C., we began the

final 2-day session of the Dixon V evidentiary hearing.     Williams

attended in Minns’ place and did not actively participate.

On the second day of the Washington, D.C., session, the
                              - 20 -
Kersting project petitioners agreed to submit a joint opening

brief for which Binder would do most of the work.   Counsel for

respondent and the Kersting project petitioners further informed

the Court that they agreed that attorney’s fees incurred during

the Dixon V remand proceeding should be awarded under section

6673(a)(2) rather than section 7430.

     F.   Our Determination of Scope of Thompson Settlement and
          Awards of Appellate Fees

     On July 14, 2005, Binder filed a 189-page joint opening

brief signed by all petitioners’ counsel who had participated in

the Dixon V remand proceeding.   Among the myriad issues addressed

in this brief were the treatment of the section 6651(a)(1)

addition to tax as a term of the Thompson settlement and the

cutoff date of deficiency interest accruals against Kersting

project petitioners, as well as petitioners’ primary argument

that the overall percentage reduction in deficiencies provided by

the Thompson settlement amounted to approximately 80 percent of

the Thompson deficiencies.

     On July 14, 2005, Sticht filed a nine-page supplemental

brief arguing for an 87-percent reduction in deficiencies and an

earlier cutoff date for interest accruals on the deficiencies.

On July 15, 2005, Jones, O’Donnell, and Izen filed a 21-page

joint supplemental brief arguing primarily that the Court should

impose as a sanction a 100-percent reduction in the deficiencies

on respondent.   Minns did not file a supplemental brief.
                               - 21 -
     On May 2, 2006, we issued our opinion in Dixon VI,

explaining our determination of the terms and benefits of the

Thompson settlement, including a 63.37-percent reduction of the

Thompson deficiencies.    In Dixon VII and Young v. Commissioner,

T.C. Memo. 2006-189, issued May 10 and September 6, 2006,

respectively, we awarded appellate fees and expenses under

section 7430 for services through April 30, 2003, the date

respondent filed the motion for a status conference.

     G.   Minns’ Motion for Reconsideration

     On June 6, 2006, Minns, on behalf of the Hongsermeiers,

filed a motion for reconsideration of our opinion in Dixon VI.

Minns’ motion presented two arguments.   First, Minns argued that

the Court should have cut off interest on petitioners’

deficiencies commencing in 1986 with the inception of the fraud

and not 1992, in accordance with respondent’s concession, and

should have handled the section 6651(a) late-filing addition

differently.   Second, Minns argued that the Court’s opinion in

Dixon VI did not adequately address later misconduct of

respondent’s attorneys.

     On September 7, 2006, we issued Dixon VIII, responding to

the Hongsermeiers’ motion for reconsideration filed by Minns.

With regard to Minns’ first argument relating to the cutoff of

interest and treatment of section 6651 additions to tax, we cited

Estate of Quick v. Commissioner, 110 T.C. 440, 441 (1998), and
                             - 22 -
noted that we had fully addressed these issues in Dixon VI,10 and

we declined to do anything further.   Dixon VIII n.3; see also

Stoody v. Commissioner, 67 T.C. 643, 644 (1977); Lowry v.

Commissioner, T.C. Memo. 2004-10; Estate of Scanlan v.

Commissioner, T.C. Memo. 1996-414.

    We responded to Minns’ second argument that we had not

determined the “full extent of the wrong done by the government

trial lawyers” by noting that Izen, Jones, and O’Donnell had

addressed this subject in their supplemental brief; we

explained that further inquiries would violate the “law of

the case” and “rule of mandate” established by the Court of

Appeals for the Ninth Circuit in Dixon V.

III. The Minns Law Office’s Dixon V Remand Proceeding Fee and
     Expense Requests

     Respondent, in a status report of July 13, 2005, at 22 n.7,

had suggested that petitioners’ counsel submit their fee

applications for services in the Dixon V remand proceeding to

respondent for review before filing them with the Court.

Respondent indicated that “the possibility exists that




     10
      Minns’ arguments had been previously argued in Binder’s
July 14, 2005, opening brief (arguing in section IV, subsections
D and E that petitioners were entitled to interest and penalty
reductions) and in Jones’ July 15, 2005, supplemental brief
(arguing in section VII that the Court had not determined the
“depth of respondent’s counsel’s fraud”).
                                - 23 -
agreement could be reached at least with respect to some portion,

and conceivably all, of the fees requested in a particular application”.

     Sticht and Irvine responded to this invitation timely by

providing contemporaneously created time sheets and expense

records to respondent.   In October 2005 Sticht began to provide

respondent with timesheets and invoices reflecting work performed

and amounts paid by his clients.     In June 2006 Irvine began to

forward time sheets and other documentation to respondent for

review.   Sticht and Irvine were thereby able to reach agreement

with respondent on the reasonable amounts of their fees and

expenses well before we set the time for filing all petitioners’

fee and expense requests.11

     On May 4, 2007, we ordered all participating petitioners to

submit requests for attorney’s fees and expenses incurred in the

Dixon V remand proceeding by June 8, 2007.     On May 29, 2007,

Jones filed a motion, which we granted, to extend the time to

file all such requests to July 8, 2007.

     Minns did not initiate contact with respondent’s counsel

on the subject of a negotiated fee and expense award until after

our order of May 4, 2007.     Because Minns had not prepared




     11
      With respect to Sticht’s fees and expenses, see supra note
2; with respect to Irvine’s fees and expenses, see Dixon IX.
                              - 24 -
contemporaneous timesheets or sent client invoices but was

attempting to prepare timesheets on the basis of Porter & Hedges

records, respondent told Minns that it would not be possible to

reach agreement before the deadline for filing fee applications

and that Minns should file his fee application with the Court.

     On June 12, 2007, Williams filed petitioners’ request

for an award of attorney’s fees on behalf of the Hongsermeiers.12

The request covered fees from January 20, 2003, through May 23,

2007, and requested a total of $1,006,629.85 in fees and

$21,363.57 in expenses.   Included with the request was an

84-page form of bill dated June 8, 2007, addressed to the

Hongsermeiers.

     On July 5, 2007, respondent filed a response to petitioners’

request for an award of attorney’s fees and expenses, noting

numerous errors and inconsistencies in petitioners’ request

of June 12, 2007.   For example, according to petitioners’ fee

and expense application entry for October 31, 2005, Minns

and Williams each worked 30 hours that day.   Several other

entries conflicted with entries in Binder’s and Irvine’s

timesheets, from which Minns and Williams derived much of

the information used to reconstruct their timesheets.




     12
      Williams was admitted to the Texas bar in 2001. Sticht’s
associate Boris Orlov was admitted to the California bar in 2002;
Sticht charged and respondent agreed to $175 per hour as the rate
for Orlov’s services in the Dixon V remand proceeding.
                              - 25 -
Moreover, according to respondent, many of the entries in

petitioners’ fee and expense request placed Minns or Williams

at events for which they were not present.   With the response

respondent submitted Exhibits A through J listing respondent’s

specific objections grouped by category.

     On September 17, 2007, Williams filed petitioners’ reply to

respondent’s response to petitioners’ original fee and expense

request as well as an amended fee and expense request (unless

otherwise specified, all references to a fee request are to the

amended fee and expense request).   In their amended request,

which included another form of bill (85 pages) to the

Hongsermeiers dated August 29, 2007, petitioners reduced their

requested fee award to $967,362.21 but slightly increased the

requested expense award to $21,525.99.   In so doing, petitioners

corrected some of the inaccuracies described in respondent’s

response.   For example, the entries claiming Minns and Williams

had each worked 30 hours on October 31, 2005, were each changed

to 30 minutes.   Petitioners also conceded that they should not

receive any award for fees awarded in Dixon VII, but they did not

concede that they should not receive an award for appellate fees

that they had not presented for our consideration in Dixon VII.

     In the original request for fees and expenses of June 12,

2007, and the amended request of September 17, 2007, Williams

asserted that the Hongsermeiers are or remain liable for the
                              - 26 -
requested fees under an executed contract with the Minns Law

Office.   The original and amended request included requests for

“such ‘fees for fees’ as they have shown and will show to this

Court, plus * * * interest on such fees and expenses beginning

January 17, 2003, the day the Ninth Circuit Court of Appeals

ruling [in Dixon V] was filed”.   The Hongsermeier test-case

petitioners have never filed a supplemental request for “fees for

fees”.

     Petitioners’ reply repeated the assertion that the

Hongsermeiers “are personally liable for massive legal fees”,

but also stated that “they are currently joined by thirty-nine

piggybackers who helped finance the case post [Dixon V]”.

     On September 25, 2007, we ordered petitioners to

supplement their amended fee request by filing a copy of the

fee agreement between the Hongsermeiers and Minns with respect

to the Dixon V remand proceeding.    On October 1, 2007,

petitioners complied in part with that order by filing a

form of fee agreement with petitioner Richard Hongsermeier

(Fiorella Hongsermeier is not included as a party and the

agreement is signed and dated March 3, 2003, by Richard

Hongsermeier but not by Minns).   The agreement provides for the

payment of an up-front fee of $3,500 plus a monthly fee of $100

until the case has been concluded.     The agreement contemplates a

similar arrangement with at least 30 non-test-case petitioners.
                              - 27 -
Although Williams asserts in the September 17 reply that “thirty-

nine piggybackers” have signed up, as yet there is no evidence in

the record of the number and identity of non-test-case

petitioners who may have joined in this arrangement or of

amounts they have actually paid Minns for work done in the

Dixon V remand proceeding.

     Other salient terms of the Hongsermeier fee agreement

include:

           Accounting. There will be no charges for work
           already done.

           Fees. * * * Client is responsible for all legal
           fees on remand. * * * Client will be credited for
           * * * payments [by other persons who sign up]
           but remains liable for payment of the entire
           legal fee.

           Rates. The rate for Michael Minns is $500.00 per
           hour. The rate for Enid Williams is $250.00.
           The rate for paralegals is $100.00 per hour.
           The rate for secretaries is $75.00 per hour.

           Covenant. The client agrees and covenants
           that: * * *
                2. Understands that this agreement is
                   entered into because the Firm expects
                   to make a profit on this leg of the
                   case.

                3. The Client understands that the Firm
                   may earn substantially more than its
                   normal hourly rate under this agreement
                   or substantially less. . . . The Firm
                   will pursue it [disciplinary proceeding
                   against IRS attorneys] for the public good.

     On October 9, 2007, respondent filed a response to

petitioners’ amended fee and expense request; on October 12,
                             - 28 -
2007, respondent filed a supplement to the October 9, 2007,

response.

     Respondent observed in the October 12, 2007, supplement

that in all likelihood the amounts in the amended request for

fees and expenses substantially exceeded what Minns’ clients had

actually paid or were obligated to pay.   Respondent argued that

these excess amounts had therefore not been “incurred” within the

meaning of section 6673(a)(2)(B).   This is an argument that we

have rejected in Dixon IX with respect to the Porter & Hedges fee

arrangement to represent the Dixons and the DuFresnes in the

Dixon V remand proceeding without cost to them.

     Our remaining tasks are to examine respondent’s general

objections to the billing rates claimed by petitioners for the

services of Minns and his staff, respondent’s specific objections

to entries for time allegedly spent (and related expenses) as

unrelated to the Dixon V remand proceeding, and the reliability

of documents submitted with petitioners’ fee request; we conclude

by addressing “overlawyering” with respect to the time remaining

after we have addressed respondent’s general and specific

objections.

                           Discussion

I.   Application of Section 6673(a)(2)(B)

     The parties agree that attorney’s fees and expenses should

be awarded under section 6673(a)(2)(B) with respect to all
                               - 29 -
petitioners who participated in the Dixon V remand proceeding.

Section 6673(a)(2) provides:

          (2) Counsel’s liability for excessive costs.--
     Whenever it appears to the Tax Court that any attorney
     or other person admitted to practice before the Tax
     Court has multiplied the proceedings in any case
     unreasonably and vexatiously, the Tax Court may
     require--

               (A) that such attorney or other person pay
          personally the excess costs, expenses, and
          attorneys’ fees reasonably incurred because of
          such conduct, or

               (B) if such attorney is appearing on behalf
          of the Commissioner of Internal Revenue, that the
          United States pay such excess costs, expenses, and
          attorneys’ fees in the same manner as such an
          award by a district court.

     A. General Rules

     During the Kersting tax shelter litigation this Court has

awarded attorney’s fees and expenses under section 6673(a)(2)(B)

incurred in proceedings in this Court--Dixon IV, Dixon IX, and

Gridley II--and under section 7430 for fees and expenses incurred

in the Dixon V appellate proceeding--Dixon VII and Young v.

Commissioner, T.C. Memo. 2006-189.

     In Dixon IV, Dixon VII, Young, and Dixon IX, we explained

the distinction between fee-shifting prevailing party statutes,

such as section 7430, which are based on substantive policy that

prevailing private parties should be able to recover fees and

expenses from the Government in certain types of cases, and fee

sanction statutes, such as section 6673(a)(2), which emphasize

punishment and deterrence of litigation misconduct by both
                                - 30 -
private and Government attorneys.    See Chambers v. NASCO, Inc.,

501 U.S. 32, 52 (1991); Bus. Guides, Inc. v. Chromatic Commcns.

Enters., Inc., 498 U.S. 533 (1991); Cooter & Gell v. Hartmarx

Corp., 496 U.S. 384, 409 (1990).    Fee sanction statutes, such as

section 6673(a), generally are designed to punish and deter

litigation misconduct of the parties, and section 6673(a)(2)(B)

in particular is designed to punish and deter the misconduct of

the Commissioner’s counsel.   Section 6673(a)(2) also requires

that the fees and expenses awarded be reasonably related to the

conduct giving rise to the sanction.

     Both section 7430 and section 6673(a)(2) limit the award to

reasonable fees and expenses.    However, fee-shifting statutes,

such as section 7430, impose additional limitations that do not

apply under the fee sanction statutes, placing an hourly rate cap

on fees, imposing a net worth limitation on taxpayers requesting

reimbursement, and allowing awards to be made only in favor of

prevailing private parties.

     B.   Meaning of “Incurred” Under Section 6673(a)(2)(B)

     Before addressing hourly rates and respondent’s objections

to time spent, we summarily dispose of respondent’s argument that

we should reduce the award because some portion of the fees and

expenses requested has not been “incurred” within the meaning of

section 6673(a)(2)(B).   Respondent argues that the fees and

expenses requested have not been “incurred” to the extent they
                                - 31 -
exceed amounts paid or payable by Minns’ clients for legal

services in the Dixon V remand proceeding.

     This is the same argument respondent made in Dixon IX, that

the fees and expenses claimed by Irvine on behalf of his firm for

services in the Dixon V remand proceeding had not been “incurred”

under section 6673(a)(2)(B) because Irvine on behalf of his firm

had agreed with the Dixons and the DuFresnes to represent them in

the Dixon V remand proceeding at no cost except for such fees and

expenses as might be allowed by the Court.    In Dixon IX we

rejected respondent’s argument, relying on both section

6673(a)(2)(B) and our inherent power, to hold that respondent had

incurred the obligation to pay those fees and expenses as a

result of the misconduct of his attorneys.

     By a parity of reasoning, we reject respondent’s similar

argument in the case at hand.    If and to the extent it should

turn out that the reasonable fees and expenses respondent is

otherwise obliged to pay exceed the total amounts paid and

payable by Minns’ clients, we hold that respondent will be

obliged to pay Minns the excess.13


     13
      Our conclusion in this regard renders moot our doubt that
the Hongsermeiers (who filed net worth affidavits in connection
with Minns’ request for appellate legal fees under sec. 7430)
have ever actually been obligated to pay the full amount of
Minns’ fees and expenses for services in the Dixon V remand
proceeding. One of the orders we shall issue with this opinion
will require Minns to set forth and substantiate the amounts paid
by the Hongsermeier test-case petitioners and his other clients
for services in the Dixon V remand proceeding, pursuant to fee
                                                   (continued...)
                                - 32 -
      We now award fees under section 6673(a)(2)(B) for services

Minns and his staff performed in the Dixon V remand proceeding.

To fix a fee award under section 6673(a)(2)(B), we multiply the

number of hours reasonably expended by the attorney’s reasonable

hourly rate.    Pennsylvania v. Del. Valley Citizens’ Council, 478

U.S. 546, 563 (1986); Hensley v. Eckerhart, 461 U.S. 424, 433

(1983).    To calculate the fee award for Minns’ services, we first

determine reasonable hourly rates for Minns and his staff and

then determine the number of hours Minns reasonably expended in

the remand proceeding.

II.   Reasonable Hourly Rates

      The hourly rates petitioners claimed for Minns and his

staff, which respondent argues are excessive, are as follows:

$500 per hour for Minns’ services, $250 per hour for Williams’

services, $100 per hour for the paralegal’s services, and $75 per

hour for the secretary’s services.       For the reasons discussed

below, we hold that Minns’ and Williams’ claimed rates are

unreasonably high and should be reduced, and that the paralegal’s

and the secretary’s claimed rates should be allowed to stand.        We

reduce Minns’ rate to $350 per hour and Williams’ rate to $175

per hour.



      13
      (...continued)
and expense agreements and otherwise. Minns’ responses to this
order will enable us to determine the amounts of reimbursements
payable to Minns’ various clients and the excess amount, if any,
payable to Minns.
                                - 33 -
     The reasonableness of an attorney’s hourly rate is

determined by the amount that attorneys of like skill in the area

would typically be entitled to for similar work.     Harper v.

Commissioner, 99 T.C. 533, 551 (1992).     To determine a reasonable

hourly rate for services of Minns and his staff, we first look to

the billing rates of his fellow attorneys in the same matter, the

Dixon V remand proceeding.

     A.      Minns’ and Williams’ Hourly Rates

     Like Minns, Attorneys Jones, Sticht, and Izen represent

private clients from around the United States in tax controversy

work.     Like Minns, each of these other attorneys is a sole

practitioner who served as the primary litigator on behalf of his

clients, with assistance from an associate attorney and other

support staff.     Jones, Sticht, and Izen all charged $350 per hour

and Sticht charged $175 per hour for the services of his

associate Boris Orlov (Orlov) in the Dixon V remand proceeding.

We use the hourly rates of these attorneys and associate as

guidelines in determining the proper hourly rates for the

services of Minns and Williams.

     Services provided by Binder and Irvine (the attorneys of

Porter & Hedges) are not directly comparable to those provided by

Jones, Sticht, Izen, and Minns.     By informal agreement of all

counsel, Porter & Hedges, through Binder, played the lead role in

representing all petitioners in the Dixon V remand proceeding.

Porter & Hedges is a mid-sized law firm (approximately 100
                                - 34 -
lawyers), with greater resources and correspondingly greater

overhead costs.     Despite Binder’s role as lead counsel, his

average rate, $367.50 per hour, was not much greater than the

hourly rate of Jones, Sticht, and Izen.     Irvine played a

restricted role as Binder’s managing/reviewing partner at Porter

& Hedges; we regard Irvine’s higher average hourly rate, $425 per

hour for far fewer hours, as appropriate.14

     Although office location can be a factor in determining a

reasonable hourly rate, it does not outweigh the similarities in

the nationwide services provided by Jones, Sticht, Izen, and

Minns.    While the offices of Porter & Hedges, Minns, and Izen are

all in or near Houston, Texas, the offices of Jones and Sticht

are in Las Vegas and Los Angeles, respectively.    If we were to

give office location some weight, Minns’ services would be more

comparable to the services of Binder and Irvine than to those of

Sticht and Jones.    However, Izen’s office is also in the Houston

area, and Minns’ services during the Dixon V remand proceeding

were more like Izen’s services than the services of Binder and

Irvine.   The similarities in the practices of Jones, Sticht,

Izen, and Minns, the similar roles of each in the Dixon V remand

proceeding, and the consistency of the hourly rates of Jones,

Sticht, and Izen outweigh the significance of any differences in

their office locations.    Office location is not a factor that


     14
      We note that respondent did not object to Irvine’s and
Binder’s hourly rates.
                                - 35 -
influences our holdings of reasonable hourly rates for Minns and

Williams.

     Minns’ allowable billing rate should approximate or equal

the rate charged by Jones, Sticht, and Izen.    Williams’ hourly

rate should be in the same range as the rate Sticht charged for

Orlov’s services.   The hourly rate petitioners request for Minns’

services, $500 per hour, is substantially greater than the $350

hourly rate Jones, Sticht, and Izen charged for their services,

and the rate petitioners request for Williams’ services, $250 per

hour, is substantially greater than the $175 hourly rate Sticht

charged for Orlov’s services.    The rates petitioners request for

Minns’ and Williams’ services in the Dixon V remand proceeding

exceed the rates that “‘attorneys of like skill in the area would

typically be entitled for a given type of work’”.      See Harper v.

Commissioner, supra at 551 (quoting City of Detroit v. Grinnell

Corp., 495 F.2d 448, 471 (2d Cir. 1974)).

     We conclude that the reasonable hourly rates for Minns’s

and Williams’ services are $350 and $175 per hour, respectively.

     B.     Paralegal’s and Secretary’s Hourly Rates

     Petitioners request $100 per hour for paralegal services and

$75 per hour for secretarial services.    Because the rate charged

for Minns’ paralegal’s services ($100 per hour) is lower than

both the rates of Jones’ paralegal ($120 per hour) and Porter &

Hedges’ paralegals ($130 per hour), we conclude that $100 per
                                  - 36 -
hour should be allowed to stand as a reasonable rate for Minns’

paralegal’s services.

       Minns’ legal secretary provided some services similar to

those performed by the paralegal, such as drafting some legal

documents.     It would not be unreasonable to charge $75 an hour

for services of the secretary for which the paralegal charge

would be $100 an hour.     We conclude that $75 per hour is a

reasonable rate for Minns’ secretary for the performance of

paralegal type services.      The schedule immediately following

reflects petitioners’ amended fee request before and after

applying the reduced rates for Minns and Williams:

                          Before                      After
                 Hours    Rate      Total      Rate       Total
   Minns       1,533.29   $500   $766,645.00   $350    $536,651.50
   Williams      738.27    250    184,567.50    175     129,197.25
   Paralegal     124.18    100     12,418.00    100      12,418.00
   Secretary      49.98     75      3,748.50     75       3,748.50
     Total     2,445.72     —     967,379.00     —      682,015.25

The above reductions in Minns’ and Williams’ hourly rates reduce

petitioners overall request by $285,363.75 ($967,379.00 minus

$682,015.25 equals $285,363.75).

III.    Hours Reasonably Expended

       To determine the number of hours Minns and his staff

reasonably expended on the Dixon V remand proceeding, we must

first eliminate entries that are clearly unreasonable.

Respondent argues that we should reduce petitioners’ requested

award because certain categories of fee entries are unrelated to

the Dixon V remand proceeding or are otherwise excessive or
                             - 37 -
duplicative and because Minns’ time entries and billing records

are unreliable.

     To be compensable, hours expended in litigation must be

reasonably related to the Dixon V remand proceeding and must not

be excessive or duplicative of other counsel’s efforts.    See

Hensley v. Eckerhart, 461 U.S. at 434 (courts need not award fees

for services for which attorneys should not bill their clients);

Saizan v. Delta Concrete Prods. Co., 448 F.3d 795, 800 (5th Cir.

2006) (duplicative work efforts are an abuse of billing

judgment); LaPrade v. Kidder Peabody & Co., 146 F.3d 899, 906

(D.C. Cir. 1998); Napier v. Thirty or More Unidentified Fed.

Agents, 855 F.2d 1080, 1094 (3d Cir. 1988); see also Amlong &

Amlong, P.A. v. Denny’s, Inc., 457 F.3d 1180, 1190 (11th Cir.

2006); Gillespie v. Commissioner, T.C. Memo. 2007-202, affd. 292

Fed. Appx. 517 (7th Cir. 2008); Kenny A. v. Perdue, 454 F. Supp.

2d 1260, 1286 (N.D. Ga. 2006) (referencing the analogous language

of 28 U.S.C. sec. 1927), affd. 532 F.3d 1209 (11th Cir. 2008).

     A.   Preliminary Comments

     Before we address respondent’s arguments that certain fee

entries are unrelated to the Dixon V remand proceeding or

otherwise excessive or duplicative, and then the reliability of

Minns’ time records, we make some general comments about

excessive and duplicative efforts in the Dixon V remand

proceeding.
                              - 38 -
     On reflection, it appears to us that we permitted the Dixon

V remand proceeding to become “over-lawyered”.15     In the absence

of any objection or contrary suggestion by respondent, we

consolidated 27 Kersting project cases and allowed test-case

petitioners represented by Izen, Minns, and Irvine and Binder and

non-test-case petitioners represented by Izen, Sticht, and Jones

and O’Donnell to participate in the Dixon V remand proceeding,

the same 27 cases we had consolidated for the purpose of the

earlier DuFresne remand in response to the DuFresne panel’s

directive regarding efforts to intervene by affected parties.

     In retrospect, the interests of economy and efficiency might

well have been better served if we had issued an order to show

cause why participation in the Dixon V remand proceeding should

not be limited to test-case petitioners as they had been

represented by three sets of attorneys in the Court of Appeals in



     15
      The table below summarizes the hours and legal fees and
expenses (by firm and in total) Kersting project petitioners have
requested for attorney services in the Dixon V remand proceeding:

Attorney        Hours        Fees        Expenses           Total
Jones           1,155    $265,717.45    $15,965.97       $281,683.42
Minns           2,246     967,362.21     21,525.99        988,888.20
Izen            2,245     748,674.14     38,248.06        786,922.20
Porter &
  Hedges        2,696     980,337.75     57,204.83       1,037,542.58
    Total       8,342   2,962,091.55    132,944.85       3,095,036.40

In addition, respondent agreed that non-test-case petitioners
represented by Sticht were entitled to recover fees and expenses
on the order of 764 hours and $237,000 for services of Sticht and
Orlov in the Dixon V remand proceeding (Oct. 4, 2006, order).
See supra note 2.
                               - 39 -
the appellate proceeding culminating in Dixon V.16    Or, if we had

been sufficiently prescient to foresee, and flexible enough to

respond to, the leading role that Binder would play in the Dixon

V remand proceeding, we might have had Porter & Hedges attorneys

provide exclusive courtroom representation, relegating other

counsel to consulting roles and a “watching brief”.    Cf., e.g.,

AARP v. EEOC, 873 F.2d 402 (D.C. Cir. 1989).

     Allowing so many attorneys to participate actively in the

Dixon V remand proceeding created an atmosphere in which some

attorneys needlessly duplicated each other’s efforts.    We remind

counsel that it is an exercise of poor billing judgment to charge

clients for excessive or duplicative efforts.   We need not award

fees where counsel have abused their billing judgment by

attempting to charge for needless duplications of the efforts of

other attorneys in the case.   We think that Minns has abused his

billing judgment and that the fees and expenses petitioners claim

are excessive and duplicative, even after giving effect to the

bulk of respondent’s specific objections.   See infra Part III.D.17


     16
      In the Dixon V appeal proceeding, briefing and oral
argument was limited by the Court of Appeals to the test-case
petitioners, represented by Izen (Youngs and Owenses), Minns
(Hongsermeiers), and Binder and Irvine (Dixons and Dufresnes).
Non-test-case petitioners, represented by Jones, Sticht, Izen,
and O’Donnell, were relegated by the Court of Appeals to a
watching brief.
     17
      We note that, unlike Sticht’s request, Minns’ request
shows no evidence that Minns actually prepared contemporeous
timesheets or that he actually billed his clients for work in the
                                                    (continued...)
                              - 40 -
     B.    Reasonably Related to Dixon V Remand Proceeding

     We now turn to fee entries that respondent specifically

objects to, on the ground that they are not reasonably related to

the remand proceeding:   (1) The appeal of Dixon III; (2)

collection, bankruptcy, and probate matters; (3) disciplinary

proceedings against McWade and Sims; (4) a Freedom of Information

Act lawsuit; (5) client relations; (6) petitioners’ June 6, 2006,

motion for reconsideration; (7) consultations with L.T. Bradt;

(8) investigative research in connection with former Commissioner

of Internal Revenue Joseph Nunan; (9) a billing dispute between

Minns and Jones; (10) the closed cases; (11) overhead expenses;

(12) inadequately described entries; and (13) other miscellaneous

entries.

           1.   Fees Incurred During Appeal of Dixon III

     Respondent objects to petitioners’ original fee request for

160.3918 hours of work, amounting to $41,773 in fees, as well as




     17
      (...continued)
Dixon V remand proceeding at any time before Williams was about
to file Minns’ fee requests with the Court.
     18
      Two of petitioners’ amended request entries are included
in this figure and are not related to services provided in
connection with the appeal of Dixon III. The two entries are for
1.5 hours for both Minns and Williams on August 21, 2009, for
services provided in connection with the Hongsermeiers’ appeal of
our Dixon IV and Dixon VIII opinions. Because these requested
fees, as well as the requested fees for work done on the appeal
of Dixon III, are requests for fees concerning appellate matters
outside the scope of this case we deal with them together.
                              - 41 -
$162.42 in expenses, for services provided in connection with the

appeal of Dixon III, as follows:

                     Rate       Hours            Amount
     Minns           $350      82.68           $28,938.00
     Williams         175      68.17            11,929.75
     Paralegal        100       7.59               759.00
     Secretary         75       1.95               146.25
     Expenses         --         --                162.42
       Total          ---     160.39            41,935.42

     Respondent argues that these fees are not related to the

Dixon V remand proceeding and that we have already awarded

petitioners attorney’s fees and expenses for Dixon III appellate

fees in our Dixon VII opinion.

     Although petitioners in their response to respondent’s

response conceded that they should not receive an award for fees

we already awarded in Dixon VII, petitioners did not adjust their

requested award to reflect their concession.   In their amended

request, petitioners changed only two of the entries that

respondent objects are related to appellate fees; namely the two

October 31, 2005, entries relating to Minns’ and Williams’

services that petitioners changed from 30 hours to 30 minutes

each.   Moreover, petitioners argue that the fees relating to the

appeal of Dixon III that they are now requesting in the pending

request are related to the cost of distributing to petitioners

the award we granted in Dixon VII.

     We agree with respondent.   In Dixon VII we awarded fees for

Minns’ services related to the appeal of Dixon III.   Petitioners’
                               - 42 -
final opportunity to apply for fees related to the appeal of

Dixon III has passed.   Therefore, we will reduce petitioners’

award by 101.39 hours, amounting to $26,285.50--to reflect the 30

hours to 30 minutes corrections--as well as $162.42 in expenses:

                      Rate            Hours           Amount
     Minns            $350            53.18         $18,613.00
     Williams          175            38.67           6,767.25
     Paralegal         100             7.59             759.00
     Secretary          75             1.95             146.25
     Expenses          --               --              162.42
       Total           ---           101.39          26,447.92

          2.     Collection, Bankruptcy, and Probate Matters

     Respondent also objects to petitioners’ fee requests for

services relating to petitioners’ collection, bankruptcy, and

probate matters, citing 91.76 hours of services, amounting to

$25,544.75, attributed as follows:

                      Rate           Hours            Amount
     Minns            $350           54.96          $19,236.00
     Williams          175           35.05            6,133.75
     Paralegal         100            1.75              175.00
       Total           ---           91.76           25,544.75

     Respondent concedes that part of the 3 hours claimed by

petitioners for a March 24, 2003, entry for Minns’s services is

allowable.   The entry at issue states that Minns reviewed a

memorandum concerning Texas and Florida probate law, to which

respondent objects, and that Minns conferred with Binder

concerning “remand issues” and the “Thompson settlement”, which

respondent concedes is allowable.    The entry at issue does not

allocate the time spent on each task, and respondent’s objection

to this entry does not provide a method of allocation.    Left to
                              - 43 -
our own devices, we allocate 1.5 hours to the review of the

memorandum on Texas and Florida probate law, which we disallow,

as indicated below.   We also allocate 1.5 hours to Minns’

conference with Binder on “remand issues” and the “Thompson

settlement”, which we allow as compensable.

     Respondent asserts that petitioners’ collection, bankruptcy,

and probate matters are not related to the primary mandate of the

Court of Appeals and the Dixon V remand proceeding.   Petitioners

urge us to award fees for these entries, claiming that, as a

result of respondent’s misconduct, various petitioners were

financially harmed so as to require the various enumerated

services.

     We agree with respondent.   Petitioners’ difficulties in

collection, bankruptcy, and probate matters are not directly

related to the Dixon V remand proceeding.   These fees were not

incurred at the trial level in the Tax Court but rather relate to

petitioners’ personal financial and legal problems.   We therefore

reduce petitioners’ requested award by 90.26 hours of work,

amounting to $25,019.75 in fees related to collection,

bankruptcy, and probate matters and to reflect the 1.5 hours for

Minns’ conference with Binder on “remand issues” and the

“Thompson settlement”, which respondent concedes is allowable:

                      Rate         Hours             Amount
     Minns            $350          53.46          $18,711.00
     Williams          175          35.05            6,133.75
     Paralegal         100           1.75              175.00
       Total           ---          90.26           25,019.75
                               - 44 -
          3.     Disciplinary Proceedings Against McWade and Sims

     Respondent objects to our awarding fees for Minns’ efforts

in bringing disciplinary actions against McWade and Sims,

amounting to 111.28 hours of services and $30,396.75 in fees,

attributed as follows:

                       Rate         Hours             Amount
     Minns             $350          76.85          $26,897.50
     Williams           175           0.75              131.25
     Paralegal          100          33.68            3,368.00
       Total            ---         111.28           30,396.75

     In their amended request, petitioners changed two of the

entries that respondent objects to as related to Minns’

disciplinary actions against McWade and Sims; namely two entries

dated February 6, 2009, which reduced the hours claimed for

services by Minns from 12 hours to 2 hours and the hours claimed

for services by Minns’ paralegal from 12 hours to 4.45.

     Respondent argues that the attorney disciplinary proceedings

were not adequately related to the Dixon V remand proceeding.    We

agree with respondent.    Disciplinary proceedings against McWade

and Sims are not related to our determination of the terms of the

Thompson settlement.    As Minns indicated in the Hongsermeier fee

agreement, this was pro bono activity for which he did not expect

to be compensated.   We therefore reduce petitioners’ fee request

by 93.73 hours of services, amounting to $26,141.75, to reflect

the amended February 6, 2009, entries reducing the hours claimed
                               - 45 -
for Minns’ services from 12 hours to 2 hours and the hours

claimed for Minns’ paralegal from 12 hours to 4.45 hours:

                      Rate            Hours              Amount
     Minns            $350             66.85           $23,397.50
     Williams          175              0.75               131.25
     Paralegal         100             26.13             2,613.00
       Total           ---             93.73            26,141.75

          4.     Freedom of Information Act Lawsuit

     Petitioners’ fee request also includes entries relating to a

Freedom of Information Act lawsuit that Minns brought to obtain

IRS personnel records as part of an effort to determine the full

extent of IRS misconduct in connection with the Thompson

settlement, amounting to 20.88 hours of services and $5,263 in

fees, attributed as follows:

                      Rate            Hours            Amount
     Minns            $350             9.55           $3,342.50
     Williams          175            10.50            1,837.50
     Paralegal         100             0.83               83.00
       Total           ---            20.88            5,263.00

     While the personnel records that Minns sought may have been

of use in the disciplinary proceedings against McWade and Sims,

the records have no bearing on our reconstruction of the terms

of the Thompson settlement, and are not sufficiently related to

the Dixon V remand proceeding.      As a result, we reduce

petitioners’ request by 20.88 hours of services, amounting to

$5,263.

          5.     Client Relations

     Respondent objects to entries that respondent refers to as

“client relations”, which respondent asserts should be
                               - 46 -
disallowed.   These entries total 641.67 hours, amounting to

$174,474.50, attributed as follows:

                      Rate            Hours           Amount
     Minns            $350            396.38        $138,733.00
     Williams          175            159.49          27,910.75
     Paralegal         100             55.72           5,572.00
     Secretary          75             30.08           2,256.00
       Total           ---            641.67         174,471.75

     In their amended request, petitioners removed 16 entries

amounting to 36.18 hours of Minns’ services concerning items that

respondent argues should be disallowed because they concern

“client relations.”    After removal of the 36.18 hours the

remaining entries total 605.49 hours, amounting to $161,809.75,

attributed as follows:

                      Rate          Hours             Amount
     Minns            $350          360.20         $126,070.00
     Williams          175          159.49           27,910.75
     Paralegal         100           55.72            5,572.00
     Secretary          75           30.08            2,256.00
       Total           ---          605.49          161,808.75

     Of the remaining entries, most relate to generalized client

relations.    Respondent’s specific objections to several entries

related to client relations lead us to conclude that some of

those entries should be (1) completely disallowed--e.g.,

communications with pro se petitioners; (2) fully allowed--e.g.,

entries relating to compensable calculations of clients’

deficiencies; or (3) partially allowed--i.e., entries that are

only partially attributable to client relations.    Nevertheless,

we are satisfied that in addressing the entries relating to

client relations together we will arrive at an overall result
                                - 47 -
approximating the result we would arrive at if we were to address

the remaining entries by breaking them down into specific

subcategories.   Therefore we will address the remaining entries

as though they are all generalized client relations.

     Petitioners argue that the remaining entries of

communications between counsel and various clients were directly

related to the Dixon V remand proceeding.    We agree with

respondent’s objection in part, but decline to disallow entries

related to client relations in their entirety.

     We may award fees for time spent on client relations if that

time is sufficiently related to the matter entitling petitioners

to a fee and expense award.    Dixon VII; Gridley II.   Where

petitioners do not provide the subject matter for client

communications, we may determine that a portion of those

communications is compensable.    Dixon VII; Gridley II.   In Dixon

VII and Young, in applying section 7430, and in Gridley II, in

applying section 6673, we determined that if it was not clear

that a fee or expense entry describing client communications was

compensable, we would assume 50 percent of the time spent on the

communication is compensable.

     In Dixon VII, we addressed the issue of client relations

when we evaluated whether to award fees related to Binder’s and

Irvine’s client conferences.    Because we did not know the subject

matter of these conferences, we assumed that 50 percent of the

time spent in the conferences related to the appeal (the matter
                              - 48 -
for which we were then awarding fees) and the remaining 50

percent related to noncompensable, unrelated matters (client

relations and “hand holding”).   We then awarded fees for the

remaining portion of the time, which we allocated to appeal-

related matters.

     In Young v. Commissioner, T.C. Memo. 2006-189, we continued

this approach in evaluating fee and expense entries that did not

specify the subject matter of client communications.   We

allocated 50 percent of those communications to the appeals,

granting an award for that portion of the time, and 50 percent to

unrelated, noncompensable matters.

     In Gridley II, we applied the foregoing approach established

in Dixon VII and Young in evaluating client relations entries for

the purposes of a request for fees and expenses under section

6673(a)(2)(B).   Using this approach we reduced petitioners award

by 50 percent of requested fees and expenses relating to client

communications where the subject matter of those communications

was unclear.

     Here we apply the approach used in Dixon VII, Young, and

Gridley II in evaluating client relations entries.   We therefore

reduce petitioners’ award by 50 percent of the remaining client

relations entries, or 302.75 hours, amounting to $80,905.25,

attributable as follows:
                                - 49 -
                      Rate           Hours               Amount
     Minns            $350           180.10            $63,035.00
     Williams          175            79.75             13,956.25
     Paralegal         100            27.86              2,786.00
     Secretary          75            15.04              1,128.00
      Total            ---           302.75             80,905.25

          6.     Motion for Reconsideration

     Petitioners’ original fee application included 39.46 hours

of services related to the Hongsermeier test-case petitioners’

June 6, 2006, motion for reconsideration, for which petitioners

claim $11,448.75 in fees, attributable as follows:

                      Rate           Hours               Amount
     Minns            $350           28.07              $9,824.50
     Williams          175            6.47               1,132.25
     Paralegal         100            4.92                 492.00
       Total            --           39.46              11,448.75

     In their amended request, petitioners removed a June 22,

2006, entry of 2.92 hours of Minns’ services for an item that

respondent objects is related to a motion for reconsideration of

this Court’s Dixon VI opinion and therefore is not allowable in

this proceeding.

     Respondent argues that because the June 6, 2006, motion for

reconsideration was frivolous and that any related fees were not

reasonably incurred, we should disallow fees for services related

to the motion for reconsideration.       Because some of the arguments

in the motion are being made by some test-case petitioners in the

pending appeals of Dixon VI and VIII, we do not characterize

these arguments as frivolous.    However, we still agree that the

fee request for work on the motion for reconsideration should be
                                - 50 -
disallowed.     Petitioners’ motion for reconsideration was nothing

more than a rehash of arguments in the briefs previously filed by

Binder, Jones, and Sticht.    We will reduce petitioners’ award by

36.54 hours, amounting to $10,426.75 in fees, to reflect the

removal in petitioners’ amended request of the June 22, 2006,

entry for 2.92 hours of Minns’ services:

                       Rate          Hours               Amount
     Minns             $350           25.15             $8,802.50
     Williams           175            6.47              1,132.25
     Paralegal          100            4.92                492.00
       Total            ---           36.54             10,426.75


          7.      Entries Related to L.T. Bradt

     Respondent objects to 35 hours of services, amounting to

$10,780, that are related to Minns’ and Williams’ communications

with L.T. Bradt, attorney for Kersting.       Those hours are

attributable as follows:

                       Rate           Hours             Amount
     Minns             $350           26.60             $9,310
     Williams           175            8.40              1,470
       Total            ---           35.00             10,780

     Respondent claims that any communications with Bradt were

not reasonably related to the proceeding on remand.       We agree.

Bradt represented Kersting during the original trial of the test

cases, during the evidentiary hearing, and in Kersting’s personal

deficiency case, assigned docket No. 7448-96.       See Kersting v.

Commissioner, T.C. Memo. 1999-197.

     Petitioners did not respond to respondent’s objections or

otherwise enlighten the Court as to the purpose or benefits to
                                - 51 -
petitioners of the consultations with Bradt, and we disallow them

in their entirety.

           8.    Entries Related to Joseph Nunan

     Respondent objects to 4 hours of entries, amounting to

$737.50, for research related to former Commissioner of Internal

Revenue Joseph Nunan (Nunan).    Those hours are attributable as

follows:

                      Rate           Hours           Amount
     Minns            $350            1.50           $525.00
     Paralegal         100            1.00            100.00
     Secretary          75            1.50            112.50
       Total           ---            4.00            737.50

     We agree with respondent.    The career of Nunan, who resigned

in disgrace from the Bureau of Internal Revenue more than 40

years before the issuance of Dixon II, bears no relationship to

the Dixon V remand proceeding.    Accordingly, we reduce

petitioners’ award by 4 hours of services, amounting to $737.50.

           9.    Chapin Billing Dispute

     Respondent objects to 4.38 hours of entries related to a

billing dispute between Minns and Jones.     Those hours are

attributable as follows:

                      Rate           Hours            Amount
     Minns            $350            1.98               $693
     Williams          175            2.40                420
       Total           ---            4.38              1,113

     Both Minns and Jones had filed entries of appearance for

petitioners Bryce H. and Reba E. Chapin (the Chapins).     On

October 30, 1992, Jones and O’Donnell filed a joint entry of
                                - 52 -
appearance for the Chapins.     On May 17, 1994, O’Donnell filed a

notice with the Court, designating Jones as counsel to receive

service.   On May 31, 1994, O’Donnell filed a motion to withdraw

from representation of the Chapins, which we granted on June 2,

1994.

     Subsequently, on July 22, 2003, Minns and Williams filed an

entry of appearance on behalf of the Chapins.    Jones never filed

a motion to withdraw as counsel.    However, on May 17, 2007, it

was Minns who signed the Chapins’ stipulated decision documents.

As of the date of this opinion, Jones remains the attorney of

record for the Chapins.

     The billing dispute between Minns and Jones is not something

for which Minns could bill petitioners.    Under Hensley v.

Eckerhart, 461 U.S. at 438, it would be inappropriate to award

fees for work related to a billing dispute.    Even though the

clients might have been willing to pay for such services if they

really wanted to replace their prior counsel, we do not believe

that respondent should be saddled with these fees.    Accordingly,

we reduce petitioners’ award by 4.38 hours of services, amounting

to $1,113 in fees.

           10.   Closed Cases

     Respondent also objects to 7.14 hours of entries related to

motions to vacate stipulated decisions in cases settled before

and after the trial in Dixon II.    Those hours are attributable as

follows:
                              - 53 -

                     Rate           Hours            Amount
     Minns           $350            2.34            $819.00
     Williams         175            3.67             642.25
     Paralegal        100            1.13             113.00
       Total          ---            7.14           1,574.25


     We agree with respondent as to 5.64 hours respondent

objected to on the grounds that those entries were related to

closed cases which are the subject of our later opinions in

Hartman I and II and are not reasonably related to the Dixon V

remand proceeding.   Early on in the Dixon V remand proceeding we

made it clear that the subject of reopening the closed cases

would not be addressed in the Dixon V remand proceeding.

     Accordingly, in regard to petitioners’ fee request in

relation to closed cases, we will reduce petitioners’ award by

5.64 hours amounting to $1,180.50 in fees which are attributable

as follows:

                     Rate           Hours            Amount
     Minns           $350            1.59            $556.50
     Williams         175            2.92             511.00
     Paralegal        100            1.13             113.00
       Total          ---            5.64           1,180.50

     The remaining 1.5 hours relate to entries on February 14,

2005, which state that Minns and Williams each spent .75 hour to

“review motion to compel settlement as supplement to motion for

leave to file motion to vacate decision.”   We interpret these

entries to relate to a “Motion for Summary Judgment of a 100

percent Discount as a Sanction” which was filed by Attorneys
                               - 54 -
Jones and O’Donnell on January 31, 2005.    However, in Gridley II

we disallowed any award for services in preparing that motion.

See Gridley II, Part II.J.   Likewise, in this case we disallow

fees incurred in reviewing that motion.     Accordingly, we further

reduce petitioners’ award by 1.5 hours amounting to $393.75,

attributable as follows:

                     Rate           Hours              Amount
     Minns           $350             .75              $262.50
     Williams         175             .75               131.25
       Total          ---            1.50               393.75


          11.   Overhead Expenses

     Respondent has identified several fee entries related to

overhead expenses.   These entries total 9.59 hours19 of the

secretary’s services, amounting to $719.25 in fees and $122 for

“overtime air conditioning” on January 5, 2003.    Generally,



     19
       Of respondent’s objection to administrative secretarial
services, 7.32 hours of the 9.59 hours of entries respondent
objects to are not included among respondent’s other objections.
The 1.5-hour entry dated Feb. 21, 2003, is included in
respondent’s objections to entries related to Joseph Nunan,
discussed supra part III.B.8. The .77-hour entry dated Feb. 21,
2003, is included in respondent’s objections to excessive time
spent on the May 30, 2003, status report, discussed infra part
III.D.
     Furthermore, petitioners’ amended fee and expense request
includes 49.98 hours of entries related to the secretary’s
services. Respondent has objected to 34.3 hours of these entries
for reasons other than their being an overhead expense. Because
respondent has expressly objected to only 41.62 hours of the
secretary’s services, we assume that respondent did not intend to
object to the remaining 8.36 hours of the secretary’s services.
As a result, we have only included 7.32 of the 49.98 hours in our
calculation of the total number of hours to which respondent
objects.
                                 - 55 -
overhead expenses, such as routine administrative tasks, are not

properly billable to clients and thus cannot be billed to

respondent.     Hensley v. Eckerhart, supra at 434; Young v.

Commissioner, T.C. Memo. 2006-189.

           a.    Secretary’s Services

     Some of the services the secretary provided are similar to

those of a paralegal.    For example, one of the secretary’s time

entries, dated August 5, 2003, states:    “Preparation of all

attorney responses to 7/11/03 Court order.”    Another entry, dated

February 18, 2004, states:    “Preparation of pleadings[.]

Preparation of response to Court’s Feb. 4 order for filing.”

These types of services are directly related to the Dixon V remand

proceeding and are compensable.

     The secretary’s services to which respondent objects are as

follows:   (1) 1.5 hours on February 21, 2003, for “Draft letter to

NY Bar association regarding Nunan finalized and send out along

with letter to clients re[:] same”; (2).77 hour on May 29, 2003,

described as “File Prepare for filing and send out status report”;

(3) 1 hour on August 25, 2003, described as “Preparation of travel

plans for September 5 status conference”; (4) 2.02 hours on August

11, 2004, described as “Preparation for travel plans for Minns and

Williams, send itinerary to clients attending hearing”; (5) 2.93

hours on September 11, 2004, described as “Preparation for trial

strategy meeting,”; (6) .52 hour on May 16, 2007, described as

“File Draft [sic] cover letter and file Hongsermeier notice of
                                 - 56 -
appearance with Tax Court”; and (7) .85 hour on May 18, 2007,

described as “Preparation of government [sic] status report for

distribution and distribute”.

     In Young we explained:     “As any billing attorney can attest,

these are the types of attorney time charges that, however

necessary the underlying activity, are difficult to justify on a

client invoice.”   Because these are not activities for which Minns

could bill his clients, we will not award them to petitioners.

However, because we disallowed the entry dated February 21, 2003,

in our section dealing with Minns’ 1.5 hours of research

concerning Nunan, we will not reduce petitioners’ award twice for

that entry.    Accordingly, we reduce petitioners’ requested award

by 8.09 hours of the administrative secretarial services,

amounting to $606.75 in fees.

          b.    Overtime Air Conditioning

     Unlike the entries pertaining to the secretary’s services,

air conditioning is an overhead expense.    We therefore reduce

petitioners’ requested expense award by the $122 in expenses

pertaining to overtime air conditioning.

          12.    Inadequately Described Entries

     Respondent also claims that 16.16 hours of the requested

fees and $11,904.03 in expenses in petitioners’ current

application are not adequately described so that we can determine

whether those entries are related to the proceeding on remand.    Of

the 16.16 hours, 9.32 are attributable to Minns and 6.84 are
                                - 57 -
attributable to Williams.    However, in their amended fee request

petitioners deleted 2.83 hours of Minns’s services on June 5,

2003.

     With regard to the remaining 13.33 hours (16.16 minus 2.83

equals 13.33), we agree with respondent that those entries are too

vague to enable us to determine whether they are reasonably

related to the Dixon V remand proceeding.    For example, one entry

dated November 29, 2004, claims that Minns spent 1.82 hours

“review[ing] Tax Court orders and pleadings”.    Because we cannot

determine whether these Tax Court orders were related to the Court

of Appeals for the Ninth Circuit’s primary mandate or another

matter entirely, we cannot determine whether the 1.82 hours are

reasonably related to the proceeding on remand.

     We also agree with respondent that the expenses totaling

$11,904.03 are inadequately described.    The entries refer to $600

for “pilot group meetings”, $1,200 in long distance charges

between 2003 and 2006, $10,004.03 for copying and mailing

expenses, and $100 for a “small group lunch”.

        We cannot determine the content or subject matter of the

pilot group meetings, long distance phone calls, copied and mailed

documents, or “small group lunch”.    We will therefore follow the

same approach as discussed in our “Client Relations” section,

supra, and reduce the award for these expenses by 50 percent.
                                   - 58 -
Therefore, we reduce petitioners’ requested award by 13.33 hours,

amounting to $3,468.50 in fees, as well as $5,952.02 in expenses,

allocable as follows:


                      Rate             Hours        Amount
     Minns            $350              6.49       $2,271.50
     Williams          175              6.84        1,197.00
     Expenses          --                --         5,952.02
      Total            ---             13.33        9,420.52


           13.   Miscellaneous

     Respondent also objects to 31.77 hours of entries for

miscellaneous reasons.   Of these, 21.74 are attributable to Minns,

5.08 are attributable to Williams, and 4.95 are attributable to

the paralegal, as follows:

                      Rate             Hours       Amount
     Minns            $350             21.74         $7,609
     Williams          175              5.08            889
     Paralegal         100              4.95            495
      Total            ---             31.77       8,993.00

     We will address in turn respondent’s miscellaneous objections

to entries relating to the services of Minns, Williams, and the

paralegal.

           a.    Minns’ Services

      The 21.74 hours attributable to Minns’ services are as

follows:   2 hours on April 30, 2003, 5.83 hours on April 30, 2003,

.5 hour on May 8, 2003, 1 hour on June 30, 2003, 1 hour on January

5, 2004, .83 hour on January 21, 2004, 2 hours on September 28,

2004, .5 hour on December 30, 2004, .5 hour on February 4, 2005,
                                - 59 -
1 hour on February 25, 2005, .25 hour on February 28, 2005, 3.97

hours on May 8, 2005, 1.08 hours on May 10, 2005, 1 hour on May

18, 2006, and .28 hour on May 15, 2007.

     The entry dated April 30, 2003, claims that Minns spent 2

hours that day discussing petitioners’ tax liability with Snell

(the accountant).    Respondent argues that these hours are not

sufficiently related to the proceeding on remand.    We disagree;

calculating petitioners’ tax liabilities was essential to the

remand proceeding.    Moreover, Snell’s participation in the remand

proceeding was so extensive that it resulted in Snell replacing

Minns at the counsel table during the Las Vegas trial session.

Thus, we make no adjustments to petitioners’ award for this entry.

     The entry dated April 30, 2003, claims that Minns spent 5.83

hours that day researching tax shelters.    Respondent claims that

this research is not sufficiently related to the proceeding

following the Court of Appeals for the Ninth Circuit’s primary

mandate in Dixon V.    We agree with respondent and reduce

petitioners’ award by 5.83 hours of Minns’ services related to

researching tax shelters.

     The entry dated May 8, 2003, claims that Minns spent .5 hour

that day discussing a status report with Binder.    Respondent

objects that Porter & Hedges’ timesheets indicate that the

discussion lasted only .3 hour.    We think that a .2-hour time

difference is reasonable and decline to reduce petitioners’ award

relating thereto.
                               - 60 -
     The entry dated June 30, 2003, claims that Minns spent 1 hour

that day in a telephone conference with Binder.   Respondent argues

that the timesheets of Porter & Hedges reflect that the conference

lasted no more than .5 hour.   We agree with respondent and reduce

the amount awarded for this entry by .5 hour.

     The entry dated January 5, 2004, claims that Minns spent 1

hour reviewing the Tax Court Rules and speaking to Wolfe Schroeter

(Schroeter), an attorney listed as practicing family law in Texas.

Respondent argues that this entry is not sufficiently related to

the proceeding on remand.   We agree.

     Petitioners have not shown that Minns’ review of the Tax

Court Rules and consultation with Schroeter were reasonably

related to the Dixon V remand proceeding.   Moreover, petitioners

have not responded to respondent’s contention that Schroeter does

not practice tax law.   Without elaboration, we cannot determine

what connection–-if any–-Minns’ conversation with Schroeter has

with ascertaining the terms of the Thompson settlement.   We

therefore reduce petitioners’ award for this entry by 1 hour of

Minns’s services.

     The entry dated January 21, 2004, claims that Minns spent .83

hour reviewing a letter from Binder and calling Binder.

Respondent objects that this conflicts with the Porter & Hedges

timesheets, which indicate Minns and Binder’s telephone

conversation lasted .5 hour.   Even if the telephone conversation

lasted only .5 hour, we do not think it is unreasonable for
                               - 61 -
petitioners to request an award for .83 hour for this entry.    If

we take into account that Minns not only spoke to Binder but also

reviewed Binder’s letter, it is reasonable that Minns’ timesheet

reflects a longer period than does Porter & Hedges’.   Therefore,

we allow this entry in its entirety.

     The entry on September 28, 2004, claims that Minns spent 2

hours reviewing a letter from Binder, written to IRS Chief Counsel

B. John Williams (B.J. Williams).   Respondent objects that there

is no record of a letter from Binder to B.J. Williams reflected in

Binder’s timesheets.   We disagree with respondent.

     On January 25, 2005, Binder recorded that he drafted and

revised a letter to B.J. Williams and sent a copy of the letter to

all counsel of record for review.   There is a discrepancy between

Binder’s and Minns’ entries as to when the proposed letter to B.J.

Williams was written, which, as previously mentioned, is not the

first time Minns’ entries have been inconsistent with Binder’s.

However, we are satisfied, notwithstanding respondent’s objection,

that Minns spent 2 hours reviewing Binder’s draft letter.   We note

in passing that respondent did not object to the time that Binder

spent in preparing the letter and that possibly the letter was

never sent.   We will not reduce petitioners’ fee award for this

entry.

     The entry dated December 30, 2004, claims that Minns spent .5

hour reviewing a stipulation to take the deposition of Peter D.

Bakutes (Bakutes), Deputy Regional Counsel for Tax Litigation for
                               - 62 -
the Western Region in San Francisco.    Respondent argues that

Bakutes’ testimony had already been taken on December 7, 2004.

However, contrary to respondent’s objection, the stipulation to

take Bakutes’ testimony on December 7, 2004, was filed with the

Court on December 8, 2004.   Nonetheless we will not award any fees

for Minns’ review of the stipulation to take Bakutes’ testimony.

The document contained less than one full page of text.

Additionally, it was of little importance on December 8, 2004,

because Bakutes’ testimony had already been taken.    Therefore,

Minns should have expended no more than a de minimis amount of

time reviewing the stipulation to take Bakutes’ testimony.

Accordingly, we will reduce petitioners’ requested award by .5

hour of Minns’ services, amounting to $175 in fees.

     The entry dated February 4, 2005, claims that Minns spent .5

hour that day reviewing petitioners’ second motion for a hearing,

which Binder filed on February 3, 2005.    Because the second motion

for a hearing was related to the Dixon V remand proceeding and the

hearing was later held in Washington, D.C., we allow this entry in

its entirety.

     The entry dated February 25, 2005, claims that Minns spent 1

hour that day reviewing an order issued on February 22, 2005.

Respondent argues correctly that no order was issued on February

22, 2005.   We thus reduce petitioners’ award by 1 hour, amounting

to $350 in fees.
                               - 63 -
     The entry dated February 28, 2005, claims that Minns spent

.25 hour reviewing an order issued February 24, 2005.   Respondent

objects that we did not issue an order on February 24, 2005.    We

agree with respondent and reduce petitioners’ award by .25 hours

of Minns’ services, amounting to $87.50 in fees.

     The entry dated May 8, 2005, claims that Minns spent 3.97

hours that day reviewing Binder’s draft supplement to petitioners’

motion to allocate the burden of proof, which petitioners claim

was filed on September 9, 2004.   Respondent argues that no

supplement to the motion to allocate the burden of proof was ever

filed.   We agree with respondent, and we need not award fees for

hours wasted through inefficiency.   See Hensley v. Eckerhart, 461

U.S. at 436-437; Young v. Commissioner, T.C. Memo. 2006-189.

Therefore, we will reduce petitioners’ requested award by 3.97

hours of Minns’ services, amounting to $1,389.50 in fees, related

to this entry.

     The entry dated May 10, 2005, claims that Minns spent 1.08

hours on phone calls with Binder and a client conference.

Respondent objects that Porter & Hedges’ timesheets do not reflect

that Minns and Binder spoke on that date.   We agree with

respondent that petitioners should not receive an award for time

attributable to a conference with Binder that never happened.

Accordingly, we will reduce the amount awarded to petitioners by

50 percent.
                               - 64 -
     We also note that the remaining portion of the entry is

attributable to nonspecific client communications.   For the

reasons discussed in our “Client Relations” section, supra, we

have determined that we will award only 50 percent of the

requested award for entries pertaining to client communications

that do not specify the subject matter of those communications.

We reduce petitioners’ award pertaining to the entry dated May,

10, 2005, by 75 percent or .81 hour of Minns’ services, amounting

to $283.50 in fees.

     The entry dated May 18, 2006, claims that Minns spent 1 hour

in conference with a client and in a telephone conference with all

counsel.   Respondent objects, arguing that the Porter & Hedges

timesheets indicate that the conference lasted only .5 hour.   We

agree with respondent that the conference was only .5 hour.

However, the entry indicates that Minns also held a conference

with a client.   By inference, the remaining .5 hour of the May 18,

2006, entry is attributable to that client conference.   Because we

have determined that we will award only 50 percent of nonspecific

client relations entries, we reduce the award for this entry by

.25 hour, which is 50 percent of the .5 hour attributable to a

client conference, amounting to $87.50 in fees.

     The entry dated May 15, 2005, states that Minns spent .28

hour that day composing an email to Snell regarding stipulated

decisions in the Chapin and Meyner cases.   Respondent argues that

these stipulated decisions are not sufficiently related to the
                                - 65 -
proceeding on remand.   We agree and reduce petitioners’ requested

award by .28 hour.   Therefore, after reviewing respondent’s

miscellaneous objections to Minns’ fee entries, we have reduced

petitioners’ requested award by 14.39 hours of Minns’ services,

totaling $5,036.50 in fees.

            b.   Williams’ Services

     The 4.33 hours of Williams’ services respondent objects to

comprise: .5 hour on January 5, 2004, 2 hours on September 28,

2004, .5 hour on February 4, 2005, .25 hour on February 28, 2005,

and 1.08 hours on May 13, 2005.

     The entry dated January 5, 2004, states that Williams spent

.5 hour reviewing Tax Court Rules and speaking with Schroeter.

Respondent objects that these activities are not sufficiently

related to the proceeding on remand.     We agree with respondent for

the same reasons as those in our discussion of a nearly identical

entry referring to Minns’ services.      See supra part III.B.13.a.

We reduce petitioners’ requested award by .5 hour of Williams’

services, amounting to $87.50 in fees.

     The entry dated September 28, 2004, states that Williams

spent 2 hours reviewing a “memo” Binder had written to B.J.

Williams.    For the reasons provided in our discussion of a nearly

identical entry related to Minns’ review of the proposed letter to

B.J. Williams, we decline to make any adjustments to petitioners’

award for this entry.   See supra part III.B.13.a.
                                - 66 -
     The entry dated February 4, 2005, states that Williams spent

.5 hour reviewing petitioners’ second motion for a hearing, which

Binder filed on February 3, 2005.   Respondent argues that this is

not sufficiently related to the proceeding on remand.   We

disagree.   This motion resulted in our ordering the final hearing

session in Washington, D.C.   We will not reduce petitioners’

requested award for this entry.

     The entry dated February 28, 2005, states that Williams spent

.25 hour reviewing an order we issued on February 24, 2005.

Respondent argues correctly that no order was issued on February

24, 2005.   Accordingly, we reduce petitioners’ requested award by

.25 hour of Williams’ services.

    The entry dated May 13, 2005, states that Williams spent 1.08

hours in a conference with a client, followed by a conference with

Minns and Binder.   Respondent objects that the Porter & Hedges

timesheets do not reflect a teleconference on that date.     We agree

with respondent.    For the same reasons as those in our discussion

of respondent’s objection to a nearly identical entry related to

Minns’ services, see supra part III.B.13.a, we reduce petitioners’

award by .81 hour, 75 percent of the value of this entry.

     After reviewing respondent’s miscellaneous objections to

Williams’ services, we reduce petitioners’ requested award by a

total of 1.56 hours of Williams’ services, amounting to $273 in

fees.
                                 - 67 -
          c.    Paralegal Services

     Respondent raises several miscellaneous objections to 4.95

hours of paralegal services.    Those 4.95 hours comprise the

following entries: .5 hour on February 18, 2003, 1.45 hours on

February 19, 2003, and 3 hours on October 23, 2003.

     The entry dated February 18, 2003, states that the paralegal

spent .5 hour preparing a letter to be sent to B.J. Williams.

Respondent argues that the letter to B.J. Williams was not

sufficiently related to the proceeding on remand.    We disagree for

the reasons stated in our earlier discussion of a similar entry

pertaining to Minns’ services.    See supra part III.B.13.a.

Therefore we will not deduct any portion of this time entry from

petitioners’ requested award.

     The entry dated February 19, 2003, states that Minns’

paralegal spent 1.45 hours preparing contracts to send to the new

pilot group.   Respondent objects that these are engagement

agreements and not part of the Dixon V remand proceeding.      We

agree with respondent; engagement agreements are not sufficiently

related to the Dixon V remand proceeding to merit our awarding

fees for preparing them.   We adjust petitioners’ requested award

downward by 1.45 hours of paralegal services, amounting to $145.

     The entry dated October 23, 2003, states that Minns’

paralegal spent 3 hours preparing a status report.    Respondent

objects that Binder, not Minns, prepared the status report and

that 3 hours is excessive for preparing an eight-page status
                                  - 68 -
report.   We agree with respondent; 3 hours is excessive for

reviewing an eight-page status report.     We think that 1 hour is a

reasonable amount of time to have spent reviewing an eight-page

status report.   We reduce petitioners’ requested award by 2 hours

of the paralegal’s services, amounting to $200 in fees.

Therefore, after considering respondent’s objections to

miscellaneous fee entries related to the paralegal’s services, we

reduce petitioners’ requested award by an additional 3.45 hours in

paralegal time, amounting to $345 in fees.

           d.    Total

     Accordingly, we deduct a total of 19.40 hours of entries

corresponding to respondent’s miscellaneous objections, amounting

to $5,654.50 in fees.      Of these hours, 14.64 are attributable to

Minns’ services, 1.56 are attributable to Williams’ services, and

3.45 are attributable to Minns’ paralegal’s services.

                         Rate          Hours           Amount
     Minns               $350          14.39          $5,036.50
     Williams             175           1.56             273.00
     Paralegal            100           3.45             345.00
      Total               ---          19.40           5,654.50


           14.   Total Reductions for Entries Not Reasonably Related
                 to Dixon V Remand Proceeding

     After examining the entries that respondent objects to as not

reasonably related to the Dixon V remand proceeding, we have

reduced petitioners’ requested award by 736.89 hours of services,

amounting to $197,976.50 in fees and $6,236.44 in expenses.
                                   - 69 -
Therefore, after our reductions in response to respondent’s

objections, petitioners would be left with an award of $484,038.75

in fees (tabulated below) and $15,289.55 in expenses.


                            Hours                      Hourly
             Requested   Disallowed    Remaining   Rate     Award

Minns        1,533.29     441.59       1,091.70    $350   $382,095.00
Williams       738.27     194.06         544.21     175     95,236.75
Paralegal      124.18      74.66          49.52     100      4,952.00
Secretary       49.98      26.58          23.40      75      1,755.00
 Total       2,445.72     728.47       1,717.25      --   $484,038.75

     C.     Reliability of Documentation

     Respondent has asserted and Minns does not deny that the

Minns Law Office did not maintain comtemporaneous timesheets.

This is the primary reason that respondent rejected Minns’ belated

efforts to reach an agreement on fees and expenses.       Respondent

was able to reach agreement on this subject with Irvine and Sticht

because they had maintained the necessary records and had started

presenting them to respondent many months before we ordered all

petitioners in the Dixon V remand proceeding to file their fee and

expense requests with the Court.      It is our understanding that the

Minns Law Office created the entries to support the Minns request

by using the Porter & Hedges entries as a starting point.

     We are left with the definite impression that the use of this

method by the Minns Law Office has resulted in the claim of a

total number of hours that approaches the number of hours that

respondent agreed amounted to a reasonable expenditure of time by

Porter & Hedges, which by informal agreement with all counsel,
                                - 70 -
took the leading role on behalf of petitioners in the Dixon V

remand proceeding.20

     After having addressed respondent’s specific objections to

the reasonable relationship of various tasks undertaken by the

Minns Law Office to the Dixon V remand proceeding, we are left

with a lack of confidence in the accuracy of the figures for the

remaining hours.   In Dixon IV we imposed one-third across-the-

board reductions to petitioners’ fee requests because of

inadequate substantiation by their counsel.

     D.   Duplicative and Excessive Efforts

     We now address respondent’s objections that the number of

hours of services petitioners request is excessive and includes

duplicative efforts.    Respondent specifically points to:   83.07

hours, amounting to $25,609.50 in fees,21 related to preparing the

May 30, 2003, status report; 211.09 hours, amounting to $49,288.25




     20
      We have nevertheless dealt with respondent’s specific
objections to time spent on various tasks by assuming the
accuracy and correctness of the amounts of time claimed for the
purpose of removing them from the total.
     21
      Respondent’s objections to entries related to Minns and
his staff’s preparation of the May 30, 2003, status report are
attributable as follows:

                       Rate          Hours            Amount
     Minns             $350          63.71          $22,298.50
     Williams           175          18.59            3,253.25
     Secretary           75           0.77               57.75
       Total            ---          83.07           25,609.50
                                    - 71 -
in fees,22 related to preparation for hearings and depositions;

88.37 hours of other miscellaneous entries, amounting to $26,222

in fees;23 and $4,135.96 in travel expenses related to the

hearings.        However, because we find that Minns’ efforts as a whole

are excessive, we decline to reduce petitioners’ award on the

basis of respondent’s individual objections to excessive time and

fees.        Instead, we will apply an across-the-board reduction of

one-third to petitioners’ remaining award.

                1.   Excessive Fees and Expenses

        We agree with respondent’s assertions that many of the

entries in petitioners’ fee request are excessive.        Minns has

claimed excessive hours and expenses for preparing the May 30,

2003, status report, preparing for hearings, travel, and in

general.        In comparison to the other firms, Minns and his staff




        22
      Respondent’s objections to entries related to Minns and
his staff’s preparation for hearings and depositions are
attributable as follows:

                          Rate          Hours             Amount
        Minns             $350           71.20          $24,920.00
        Williams           175          138.39           24,218.25
        Paralegal          100            1.50              150.00
          Total            ---          211.09           49,288.25
        23
      Respondent’s objections that other miscellaneous entries
are excessive are attributable as follows:

                          Rate           Hours            Amount
        Minns             $350           61.47          $21,514.50
        Williams           175           26.90            4,707.50
          Total            ---           88.37           26,222.00
                                - 72 -
spent approximately twice the time preparing the status report

they filed.24

     Moreover, the Minns Law Office’s participation in the hearing

sessions and depositions was minimal.    Minns attended only the

first day of both the August 18-19, 2003, Houston status

conference and the September 20-22, 2004, hearing session.

Additionally, although Williams attended the status conferences

and the hearing sessions, she did not actively participate in the

proceedings.    However, despite our agreement with respondent that



     24
      Minns and his associates claim to have spent 79.5 hours
drafting the status report on behalf of the Hongsermeiers. The
report Minns filed contained approximately three pages of single-
spaced text.

     Binder and Irvine spent approximately 67.35 hours preparing
the status report filed on behalf of the Dixons and the
Dufresnes. The body of the status report prepared by Porter &
Hedges’ attorneys contained approximately 10 pages of double-
spaced text.

     Sticht’s time sheets indicate that he and his associates
spent approximately 30.2 hours preparing the status report filed
on behalf of certain non-test-case petitioners. Sticht’s report
contained approximately three pages of double-spaced text and was
submitted with several attached exhibits. Approximately three
pages of the attached exhibits were Sticht’s own work, prepared
for the status report.

      Izen’s timesheets indicate that he and his associates spent
approximately 31.58 hours between preparing the status report
Izen filed on behalf of the Youngs and the Owenses. The report
Izen filed contained approximately five pages of double-spaced
text.

     Jones’ timesheets indicate that he and his associates spent
8.96 hours preparing the status report and the report contained
approximately three pages of double-spaced text.
                                 - 73 -
these hours and expenses are excessive, we make no reductions to

petitioners’ award on the separate bases of respondent’s

objections.

             2.   Reduction for Duplicative and Excessive Efforts

        We do not find that this inflation of hours is limited to the

entries respondent objects to as excessive.    The hours and

expenses in Minns’ timesheets are generally excessive and are

duplicative of the services provided by Binder.    We will therefore

apply a general reduction of one-third to the fees for the time

remaining after we addressed respondent’s specific objections.

        Because the attorneys at Porter & Hedges performed the bulk

of the work during the remand period, we find that it would be

unreasonable and a duplication of effort for the other firms

participating in the remand proceeding to bill as many hours.

As note 15 supra shows, Minns and Izen both claimed more than

2,000 hours, on the same order of magnitude as the time claimed by

the Porter & Hedges attorneys, whereas Sticht and Jones claimed

more than 1,000 fewer hours than the time claimed by Minns and

Izen.

     We find and hold that it would be unreasonable and an

exercise of poor billing judgment for Minns to bill almost as many

hours as the Porter & Hedges attorneys.    It is in the light of

this observation, coupled with the lack of contemporaneous

documentation for the Minns fee and expense request, that we
                                 - 74 -
reduce by one-third Minns’ overall fee award for the remaining

time claimed.

                             Conclusion

     To calculate the award, we first reduce Minns’ and Williams’

claimed hourly rates.   We then reduce the hours petitioners have

requested for Minns, Williams, the paralegal, and the secretary by

our downward adjustments for fees not sufficiently related to the

Dixon V remand proceeding which would leave petitioners a fee

award of $484,038.75.   Then, we reduce the remainder by one-third

(33-1/3 percent) of the remaining fee amount, amounting to

$161,346.25, to reflect “overlawyering” and lack of

contemporaneous documentation.

     After completing these calculations, we find that petitioners

are entitled to an award of $322,692.50 in fees and $15,289.55 in

expenses.

     Giving effect to our concluding determinations in Dixon IX

and Gridley II, we shall invoke our inherent power to require

respondent to pay to petitioners additional amounts equal to

interest at the applicable rates for underpayments under sections

6601(a) and 6621(a)(2) on $322,692.50 and $15,289.55 from

September 17, 2007, when petitioners filed their motion to amend
                              - 75 -
their original request for attorney’s fees relating to the Dixon V

remand proceeding.25

     We will address the manner in which the awards are to be

administered in a separate order or orders implementing this

opinion.

     To give effect to the foregoing,


                                   An appropriate order or orders

                              will be issued.




     25
      We provide for accrual of amounts equal to interest from
the later date petitioners amended their original request for
attorney’s fees because their original request contained numerous
errors that remained uncorrected until they filed their amended
request.
