                  T.C. Summary Opinion 2008-77



                     UNITED STATES TAX COURT



            KEITH ROBERT CALDWELL, SR., Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 22000-06S.               Filed July 1, 2008.



     Keith Robert Caldwell, Sr., pro se.

     William J. Gregg, for respondent.



     PANUTHOS, Chief Special Trial Judge:    This case was heard

pursuant to the provisions of section 7463 of the Internal

Revenue Code in effect at the time the petition was filed.

Pursuant to section 7463(b), the decision to be entered is not

reviewable by any other court, and this opinion shall not be

treated as precedent for any other case.    Unless otherwise

indicated, subsequent section references are to the Internal
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Revenue Code as amended, and all Rule references are to the Tax

Court Rules of Practice and Procedure.

     Respondent conceded this case in full.   Petitioner advised

the Court that he intended to file a motion for administrative

and litigation costs.   The Court provided the parties an

opportunity to file a stipulation of settled issues, but the

parties were unable to agree on the terms of a settlement

document.   We also provided petitioner an opportunity to file a

motion for administrative and litigation costs.   We must now

consider:   (1) The terms of a decision to be entered, and (2)

petitioner’s motion for administrative and litigation costs.

                             Background

     Petitioner was divorced on December 29, 1988.   The Final

Decree (final decree) of divorce entered by the Chancery Court in

Montgomery County, Tennessee, requires that, following his

retirement from the U.S. Army and until the death of either

party, petitioner shall pay as alimony 40 percent of his

disposable military pension to Sueann Pak Caldwell, his former

spouse (Ms. Pak), by way of direct allotment from the payor to

Ms. Pak.    The Defense Finance and Accounting Service (DFAS) began

paying 40 percent of petitioner’s disposable military pension to

Ms. Pak in 1997.   These direct allotments continued through the

year in issue.
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     Respondent issued two notices of deficiency to petitioner

for tax year 2004.   In the first notice, dated May 9, 2006,

respondent disallowed petitioner’s claimed alimony deduction and

determined a deficiency of $2,296.     Petitioner provided

respondent a portion of his 1988 final decree and information

regarding an automatic direct allotment from his military

pension.   Respondent’s Utah service center was not satisfied with

petitioner’s documentation, asserting that petitioner did not

prove that the alimony was actually paid to Ms. Pak.     Petitioner

did not file a timely petition in response to the first notice of

deficiency.

     Respondent later determined that petitioner failed to

include his military pension in his income for 2004.1    On

September 20, 2006, respondent issued a second notice of

deficiency determining a $7,206 deficiency related to unreported

income and a $1,441 accuracy-related penalty under section

6662(a).   Petitioner resided in Virginia when he filed a timely

petition for redetermination in response to the second notice of

deficiency.




     1
       Petitioner included his military pension on line 7 of his
2004 Federal income tax return, together with his wage income.
He should have reported the retirement income separately on line
16.
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     Respondent prematurely assessed the deficiency and penalty

determined in the September 20, 2006, notice of deficiency.2

Notwithstanding petitioner’s filing a petition and the Court’s

serving the petition on respondent, respondent nevertheless

issued collection notices, including levy notices, to petitioner

between November 2006 and June 2007.3

     An Appeals officer in respondent’s Appeals Office wrote to

petitioner on June 5, 2007, to arrange a pretrial conference with

Appeals.   She informed petitioner that she intended to reverse

the determination in the second notice of deficiency (that

petitioner failed to report his military pension) because it was

clear that petitioner did report the income, just in the wrong

place.   See supra note 1.   The Appeals officer sought further

proof that the allotment was paid to Ms. Pak and questioned

whether the allotment (a) paid alimony or (b) divided his




     2
       The assessment occurred on Oct. 2, 2006, well within the
90-day period provided for petitioner to petition for
redetermination and during which time assessment, levy, and
collection are prohibited. Sec. 6213(a).
     3
       At the trial of this matter on Oct. 9, 2007, counsel for
respondent reported that respondent had abated the entire sec.
6662(a) accuracy-related penalty assessment and part of the
deficiency assessed. The deficiency assessment was abated to the
level of the deficiency determined in the first notice of
deficiency, leaving only the assessment for the amount of the
deficiency resulting from the disallowance of petitioner’s
claimed alimony deduction. The amount of the remaining
assessment was $2,296.
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retirement benefits pursuant to a qualified domestic relations

order.4

     At trial petitioner provided documentary evidence which

satisfied respondent that the payments were properly

characterized as alimony; to wit, a complete copy of the December

29, 1988, final decree.   However, respondent continued to

question whether the military pension petitioner reported on his

2004 Federal income tax return represented:   (a) Petitioner’s

gross retirement benefits, or (b) such benefits reduced by the

allotment paid to Ms. Pak.   Respondent’s counsel indicated that

respondent would be prepared to concede this case upon proof that

the allotment was paid to Ms. Pak and that petitioner’s 2004 Form

1099-R, Distributions From Pensions, Annuities, Retirement or

Profit-Sharing Plans, IRAs, Insurance Contracts, etc., included

his full military pension income.

     The Court held the record open after trial, providing the

parties additional time to clarify the record as to the amount

reported as petitioner’s military pension and the payments made

to Ms. Pak.


     4
       The statement from the Defense Finance and Accounting
Service (DFAS), dated May 5, 2006, contained in the record and
provided to respondent by petitioner, reflects a discretionary
allotment paid from petitioner’s military pension to a specific
bank. It does not indicate to which account or for whose benefit
DFAS made the payments. Apparently, respondent was also not
satisfied by the excerpt from petitioner’s final decree that the
payments are unequivocally alimony.
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     In a status report, respondent advised that he had sent

petitioner proposed stipulated decision documents reflecting

respondent’s full concession; i.e., no deficiency and no penalty

due from petitioner for 2004.   The Court closed the record and

ordered the parties to submit settlement documents on or before

February 18, 2008.   We advised the parties that if no settlement

documents were received, the Court would be inclined to enter a

decision of no deficiency and no penalty under section 6662(a)

due from petitioner for taxable year 2004.

     The Court received a letter from petitioner, filed as

petitioner’s status report, wherein petitioner indicated he would

not execute decision documents reflecting respondent’s concession

and suggested that he might seek administrative and litigation

costs under section 7430.

     The parties provided oral status reports at a subsequent

hearing.   The parties indicated that they had been unable to

negotiate a stipulation of settled issues or a settlement

document which both parties could sign,5 and petitioner indicated

his desire to seek administrative and litigation costs pursuant

to section 7430 and Rules 230-233.


     5
       Petitioner sought to include a stipulation related to his
tax refund for tax year 2005. Respondent refused to execute a
stipulation as to 2005 because only tax year 2004 is before the
Court. Petitioner also sought a commitment that respondent would
not challenge the alimony deduction in future years. Respondent
refused this request.
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     In a subsequent order, the Court provided petitioner an

opportunity to file a motion for administrative and litigation

costs.   We advised petitioner that only substantiated, out-of-

pocket costs could be awarded and instructed him to review

section 7430 and to follow Rules 230 through 233.   On April 8,

2008, petitioner filed a motion for administrative and litigation

costs.   On May 9, 2008, respondent filed a notice of objection

and memorandum in support of his objection.

                               Discussion

     Respondent has conceded all the issues other than

administrative and litigation costs, and we accept respondent’s

concessions.    Accordingly, the Court will enter a decision of no

deficiency and no penalty due from petitioner in accord with

respondent’s concession.   However, before entry of decision the

Court must consider petitioner’s motion for an award of

administrative and litigation costs.

     Reasonable administrative and litigation costs may be

allowed, but “only if the taxpayer is the ‘prevailing party’, did

not unreasonably protract the administrative or judicial

proceedings, and exhausted available administrative remedies.”

Grigoraci v. Commissioner, 122 T.C. 272, 275 (2004); see sec.

7430(a), (b)(1), (3).   The taxpayer must satisfy each of these

requirements.   Rule 232(e).
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     Section 7430(c)(4)(A) defines the term “prevailing party”.

To be a prevailing party, the taxpayer must substantially prevail

with respect to either the amount in controversy or the most

significant issue or set of issues, and he must satisfy the net

worth requirement.   However, if the Commissioner demonstrates

that his position was substantially justified, the taxpayer

cannot qualify as a prevailing party.    Sec. 7430(c)(4)(B)(i);

Petito v. Commissioner, T.C. Memo. 2002-271.

     “The term ‘reasonable litigation costs’ includes only court

costs, expert witness expenses, costs of a study or report, and

‘reasonable fees paid or incurred for the services of

attorneys.’”   Frisch v. Commissioner, 87 T.C. 838, 846 (1986)

(quoting section 7430).   Furthermore, fees claimed must actually

have been incurred, meaning that the taxpayer has paid them or

has become liable to pay them.6   See id. at 846.

     Petitioner’s motion consists of just over one page and is

signed by petitioner and notarized.    In his motion, petitioner

seeks an award of “monies in the amount of one hundred thousand




     6
       While petitioner did not identify specific costs included
in his claim, we note that he is not eligible for an award of
attorney’s fees because he was acting pro se. Moran v.
Commissioner, 88 T.C. 738, 743 (1987); Frisch v. Commissioner, 87
T.C. 838, 846-847 (1986).
                                 - 9 -

dollars (after taxes) as the sum of administrative and litigation

costs under Rule 231”.7

     Respondent objects to petitioner’s motion for administrative

and litigation costs.     Respondent agrees that petitioner

substantially prevailed with respect to the amount in controversy

and the most significant issue in the case; to wit, respondent’s

concession that petitioner is entitled to the claimed deduction

for alimony payments made in 2004.       Respondent does not assert

that petitioner protracted the proceedings or failed to exhaust

administrative remedies.     However, respondent argues that his

position was substantially justified, that petitioner has not

demonstrated that he meets the net worth requirement, and that

petitioner’s claim for $100,000 is not reasonable.

     We specifically directed petitioner’s attention to the

requirements of Rule 231(b) and (d) in our order providing him an

opportunity to file a motion for administrative and litigation


     7
       Petitioner also requests that the Court order respondent
to return petitioner’s tax refund for tax year 2005, which
petitioner claims was applied first against petitioner’s income
tax liability for tax year 2003 (resulting from respondent’s
disallowance of petitioner’s alimony deduction for 2003) and then
against petitioner’s income tax liability for 2004 (after
respondent conceded the alimony determination for 2003).
Petitioner asserts that respondent retained the 2005 tax refund
as an offset against the portion of the deficiency attributable
to the disallowed alimony deduction for 2004, which issue
respondent has now conceded. Only tax year 2004 is before the
Court. Our jurisdiction is limited to redetermining petitioner’s
tax liability for 2004; we have no authority to order a refund
for 2005. See Naftel v. Commissioner, 85 T.C. 527, 533 (1985).
                              - 10 -

costs.   Rule 231(b) requires, inter alia, that petitioner state

that he meets the net worth requirements of 28 U.S.C. section

2412(d)(2)(B) and support his statement with an affidavit;8 and

state the specific administrative and litigation costs sought,

supported by an affidavit in the form required by Rule 231(d).9

Rule 231(d) requires a detailed affidavit setting forth the

nature and amount of each item of costs for which petitioner

claims an award.

     Petitioner’s claim for costs is quoted above and avers that

$100,000 (after taxes) is the sum of his administrative and

litigation costs.   Petitioner’s motion fails to provide an

itemized statement of the costs, fees, and other expenses

claimed; his motion also fails to address the net worth

requirement.   Petitioner, therefore, has not satisfied the




     8
       Sec. 7430(c)(4)(A)(ii) references 28 U.S.C. sec.
2412(d)(1)(B) and (2)(B), which requires both the net worth
statement and an itemized statement of costs, fees, and other
expenses claimed. As relevant to this case, 28 U.S.C. sec.
2412(d)(2)(B)(i) requires that petitioner state that his net
worth did not exceed $2 million at the time he filed the
petition.
     9
       Rule 231(b), Content of Motion, also addresses the other
statutory requirements. Petitioner failed to follow this Rule in
many respects, but we need not detail each of them.
                                - 11 -

statutory requirements for a prevailing party.10      Sec.

7430(c)(4)(A).    Petitioner’s motion will be denied.

     Even if we were to conclude that petitioner otherwise

qualified as a prevailing party under section 7430(c)(4)(A), he

would not be treated as the prevailing party because respondent’s

position was substantially justified throughout this proceeding

and up until January 14, 2008, the date he conceded the final

issue.    Sec. 7430(c)(4)(B).   Respondent’s concession was made

after:    (1) Petitioner provided respondent’s counsel with a

complete copy of the final decree, which occurred at trial; and

(2) respondent received additional documents from DFAS (after

trial) proving to whom the allotment was paid in 2004.       The

Commissioner need not concede a case before receiving the

documents necessary to prove the taxpayer’s contentions.

Furthermore, the Commissioner is allowed a reasonable period to

analyze the documents and to modify his position.       Gealer v.

Commissioner, T.C. Memo. 2001-180.       Respondent conceded shortly

after receiving petitioner’s proof.      Respondent’s position was

substantially justified, and, thus, petitioner cannot be a

prevailing party and is not entitled to costs.




     10
       Without satisfying the net worth requirement and
providing the itemized statement, a taxpayer cannot be a
“prevailing party” as defined by sec. 7430(c)(4), regardless of
whether he substantially prevailed.
                              - 12 -

     Petitioner has asked the Court to restrain respondent from

challenging the alimony deduction in future years.   We do not

have that authority.   See Knapp v. Commissioner, 90 T.C. 430, 440

(1988), affd. 867 F.2d 749 (2d Cir. 1989).

     To reflect the foregoing,

                                         An appropriate order and

                                    decision will be entered.
