                        T.C. Memo. 1996-16



                      UNITED STATES TAX COURT



                 JOSEPH M. INMAN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 23997-92.              Filed January 22, 1996.



     Joseph M. Inman, pro se.

     Roberta Duffy, for respondent.



                        MEMORANDUM OPINION


     SWIFT, Judge:   This matter is before the Court on

petitioner's motion for an award of $5,000 in administrative and

litigation costs under section 7430.

     All section references are to the Internal Revenue Code, and

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

     At the time the petition was filed, petitioner resided in

Laguna Niguel, California.

     In January of 1992, respondent began an audit of

petitioner’s 1988 Federal income tax return (1988 return).

During the audit, petitioner did not appear at any of the

conferences scheduled with respondent’s representatives, and

petitioner did not provide respondent any requested information.

Instead, petitioner forwarded all correspondence from respondent

to Gary Dragna (Dragna), his alleged representative.

     In the late spring of 1992, Dragna wrote to respondent

claiming to have a power of attorney (POA) from petitioner and

demanding that respondent cease any further examination of

petitioner’s 1988 return.    Respondent could not locate a copy of

a POA for Dragna with respect to petitioner, and respondent

notified petitioner and Dragna accordingly.

     In light of petitioner’s failure to provide requested

information to respondent’s representative, on July 27, 1992,

respondent issued a notice of deficiency to petitioner

disallowing a $17,862 loss deduction claimed on the 1988 return

relating to a purported farming activity.   Therein, respondent

determined a deficiency in petitioner’s Federal income tax for

1988 of $5,055 and additions to tax for failure to timely file an

income tax return and for negligence.   On October 27, 1992,
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petitioner filed a petition with this Court alleging that

respondent had erroneously disallowed the $17,862 claimed loss.

     After the petition was filed in this case, from November of

1992 through the summer of 1993, petitioner failed to respond to

correspondence from respondent’s Appeals Office, to appear at

conferences with respondent’s trial counsel, or to otherwise

provide respondent with information that respondent had

requested.    During this time, Dragna attempted to represent

petitioner before respondent’s Appeals Office and respondent’s

District Counsel's Office.    Petitioner and Dragna, however, were

repeatedly notified that respondent could not locate a POA on

file for Dragna.    Respondent, however, did provide to petitioner

answers to certain questions raised by Dragna with respect to the

basis for the notice of deficiency and to other matters.

     In September of 1993, a month before this case was scheduled

for trial, petitioner mailed to respondent documents regarding

the deductibility of the $17,862 claimed farming loss.    The

documents generally related to petitioner’s purchase in 1982 of a

residence and a 20-acre parcel of real property in Copperopolis,

California.    None of the documents, however, corroborated that

petitioner was engaged in any type of farming activity.

Respondent reviewed those documents but reasonably determined

that they did not establish that petitioner was entitled to

deduct the claimed farming loss.
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     On October 13, 1993, a week before trial, petitioner filed

his pretrial brief in which, for the first time, petitioner

argued that the entire $20,075 reported as taxable income on his

1988 return had been mistakenly reflected as such by Dragna, who

had prepared petitioner’s 1988 return, and that the $20,075 in

reported taxable income actually represented nontaxable loan

proceeds.   Trial of petitioner’s case was continued until January

of 1994 to allow petitioner time to corroborate further his new

claim as to the nontaxable nature of the $20,075.

     In late December of 1993, respondent received from

petitioner documents that satisfied respondent’s representative

as to the nontaxable nature of the $20,075, and in January of

1994 petitioner’s case was settled on that basis.   Petitioner

never established the deductibility of the $17,862 claimed

farming loss, and the settlement that was entered into did not

reflect any deduction with regard thereto.

     Pursuant to the settlement, we entered a decision reflecting

no deficiency in income tax due from petitioner for 1988 and

reflecting no additions to tax.   When petitioner filed the

instant motion for an award of administrative and litigation

costs, we vacated our decision pending the outcome of

petitioner’s motion for administrative and litigation costs.

     Petitioner did not attach to his motion an affidavit, as

required by Rule 231(b)(5), supporting his claim that he satisfied

the net worth requirement of section 7430(c)(4)(A)(iii).   Moreover,
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petitioner did not differentiate between which portion of the

alleged $5,000 in costs was incurred as administrative costs and

which portion was incurred as litigation costs.   See Rule 231(d).

     Under section 7430(a), a "prevailing party" may be awarded

reasonable administrative and litigation costs.   Sher v.

Commissioner, 861 F.2d 131, 133 (5th Cir. 1988), affg. 89 T.C. 79

(1987); Miller v. Commissioner, T.C. Memo. 1993-346.     To qualify

as a prevailing party, however, the taxpayer must establish that

respondent's position was not substantially justified.    Sec.

7430(c)(4)(A)(i); Comer Family Equity Pure Trust v. Commissioner,

958 F.2d 136, 139 (6th Cir. 1992), affg. per curiam T.C. Memo.

1990-316.

     Whether respondent's position was substantially justified

depends upon whether respondent's position was unreasonable in

light of all the facts and circumstances of the case and in light

of legal precedents.   Whitesell v. Commissioner, 90 T.C. 702, 707

(1988); Chandler v. Commissioner, T.C. Memo. 1993-72.    Generally,

respondent's concession of all or part of a case is not by itself

sufficient to establish that respondent's position was

unreasonable.   Sokol v. Commissioner, 92 T.C. 760, 767 (1989);

Wasie v. Commissioner, 86 T.C. 962, 968-969 (1986).

     The taxpayer must also establish that the taxpayer exhausted

available administrative remedies within the Internal Revenue

Service, sec. 7430(b)(1); that the taxpayer did not unreasonably

protract the proceedings, sec. 7430(b)(4); and that the fees and
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costs requested are reasonable, sec. 7430(c)(1)(B)(iii).

     Petitioner argues, among other things, that respondent acted

unreasonably and that respondent’s refusal to acknowledge Dragna

as petitioner’s representative prevented petitioner from

establishing the deductibility of the $17,862 claimed farming

loss and prevented petitioner from raising, prior to the week of

the scheduled trial, his argument as to the nontaxable nature of

the $20,075 erroneously reported as income on the 1988 return.

Based on the above arguments, petitioner argues that respondent’s

position was not substantially justified and that his motion for

an award of $5,000 in administrative and litigation costs under

section 7430 should be granted.

     Respondent argues that, in light of petitioner’s failure to

raise until one week before the scheduled trial the nontaxable

nature of the reported income, her position herein, during the

administrative proceedings and up to the time of settlement, was

substantially justified.   Respondent notes that the deductibility

of the $17,862 claimed farming loss has never been established by

petitioner, that it was not allowed in the settlement, and that

petitioner obviously does not qualify as a prevailing party with

regard thereto.   Respondent notes further that petitioner never

established Dragna's authority to represent petitioner although

respondent gave petitioner and Dragna every opportunity to do so.
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Respondent also argues that petitioner unreasonably protracted

the administrative and litigation proceedings by not cooperating

with respondent.

     We agree with respondent on all points.     Once respondent

received sufficient documents relating to the erroneously

reported $20,075, respondent acknowledged the nontaxable nature

thereof.   We conclude that respondent’s representatives were not

unreasonable in failing to settle petitioner’s case sooner than

January of 1994.    See Meeker v. Commissioner, T.C. Memo. 1994-

290, affd. without published opinion 62 F.3d 396 (5th Cir. 1995);

Goodrum v. Commissioner, T.C. Memo. 1992-422.

     Petitioner, by not cooperating with respondent, unreasonably

protracted the proceedings in this case and did not exhaust his

administrative remedies with respondent.      Further, respondent’s

failure to recognize Dragna as petitioner’s legal representative

was not unreasonable.   Having settled this case without pursuing

the deductibility of the claimed farming loss, petitioner does

not qualify as a prevailing party with regard thereto.

     Petitioner is not entitled to an award of administrative and

litigation costs.


                                  An appropriate order and decision

                           will be entered.
