                        T.C. Memo. 2001-46



                      UNITED STATES TAX COURT



   AMILU S. ROTHHAMMER, FORMERLY AMILU S. MARTIN, Petitioner,
             AND ALFRED J. MARTIN, JR., Intervenor v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 22961-88.            Filed February 27, 2001.


     Patricia Tucker, for movant Alfred J. Martin, Jr.

     Anne W. Durning, for respondent.


                        MEMORANDUM OPINION

     COLVIN, Judge:   This matter is before the Court on Alfred J.

Martin, Jr.’s (Martin)1 motion for litigation costs under section



     1
        Alfred J. Martin, Jr. (Martin), is no longer a petitioner
because, in Martin v. Commissioner, T.C. Memo. 2000-187, we held
that we lacked jurisdiction as to him because he did not
authorize or ratify the filing of the petition in this case.
Despite this, we have jurisdiction to decide Martin’s claim for
litigation costs. See Weiss v. Commissioner, 88 T.C. 1036
(1987).
                                - 2 -

74302 and Rule 231.3   After concessions, the sole issue for

decision is whether respondent's position in the underlying

proceeding was substantially justified.    We hold that it was.

Thus, Martin is not entitled to an award of litigation costs.

     The parties submitted memoranda and affidavits supporting

their positions.    We decide the motion based on those memoranda

and affidavits.    Neither party requested a hearing.    We conclude

that a hearing is not necessary to decide this motion.      See Rule

232(a)(3).

                             Background

A.   Petitioner and Martin

     Petitioner Amilu S. Rothhammer (Rothhammer), formerly Amilu

S. Martin, lived in Colorado Springs, Colorado, and Martin lived

in Suffolk, Virginia, when the petition was filed.      Rothhammer

and Martin invested in the Elektra/Hemisphere tax shelter in the

early 1980's and deducted amounts based on those investments.


     2
        Section references are to the Internal Revenue Code in
effect for the years in issue. References to sec. 7430 are to
that section as amended by sec. 1551 of the Tax Reform Act of
1986, Pub. L. 99-514, 100 Stat. 2085, 2752, effective for
proceedings which commenced after Dec. 31, 1985. A “proceeding”
under sec. 7430 commences when the petition is filed. See Maggie
Management Co. v. Commissioner, 108 T.C. 430, 438 (1997). The
petition was filed on Sept. 6, 1988. The amendments to sec. 7430
made by sec. 6239(a) of the Technical and Miscellaneous Revenue
Act of 1988, Pub. L. 100-647, 102 Stat. 3342, 3743, do not apply
here because they are first effective for proceedings commencing
after Nov. 10, 1988.
     3
        Rule references are to the Tax Court Rules of Practice
and Procedure.
                               - 3 -

B.   Martin v. Commissioner, T.C. Memo. 2000-187

     In 1986, respondent issued a notice of deficiency to Martin

denying his Elektra/Hemisphere deductions for 1981 and 1982 and

determining a deficiency.   Respondent also issued a notice of

deficiency to Rothhammer for 1981 and another for 1982 denying

her Elektra/Hemisphere deductions for those years.     Attorney

Robert Bergman (Bergman) filed a petition on behalf of Martin and

Rothhammer in docket No. 32146-86.4    Attorney Jeffrey Berg

(Berg), who was a member of Bergman’s law firm, entered his

appearance in docket No. 32146-86 in November 1986.5

     In 1988, respondent issued a notice of deficiency to Martin

and a second one to Rothhammer denying their Elektra/Hemisphere

deductions for 1980.   Berg signed and filed a petition in this

case, docket No. 22961-88, in Rothhammer’s and Martin’s name.

Berg attached Rothhammer’s, but not Martin’s, notice of

deficiency to the petition.

     Martin contended that the 1988 petition was invalid as to

him because he did not authorize or ratify the filing of the

petition.   Respondent contended that the petition was valid as to

Martin because he authorized Berg to sign and file the petition


     4
        Amilu Rothhammer was dismissed from docket No. 32146-86
on Sept. 30, 1988, for lack of jurisdiction, because she and
Martin had filed separate petitions disputing deficiencies for
1981 and 1982.
     5
        Jeffrey Berg was allowed to withdraw as counsel in docket
No. 32146-86 on Jan. 26, 1989.
                                - 4 -

or ratified the filing of the petition.    Respondent’s contention

that Martin authorized or ratified the filing of the petition was

based on the following facts:    (1) Attorney Berg signed the

petition on Martin’s behalf; (2) correspondence to and from

Martin referred to docket No. 22961-88; (3) Rothhammer and Martin

had a case involving Elektra/Hemisphere for other years; and

(4) Berg and his law firm had filed many petitions on behalf of

Elektra/Hemisphere investors.    See Martin v. Commissioner, T.C.

Memo. 2000-187.

                            Discussion

A.   Motion for Litigation Costs

     Generally, a taxpayer who has substantially prevailed in a

Tax Court proceeding may be awarded reasonable litigation costs.

See sec. 7430(a), (c).   To be entitled to an award, the taxpayer

must:

     1.   Exhaust administrative remedies.    See sec. 7430(b)(1).

Respondent concedes that Martin meets this requirement.

     2.   Establish that the position of the United States was

not substantially justified.    See sec. 7430(c)(2)(A)(i).   The

parties dispute whether Martin meets this requirement.

     3.   Substantially prevail with respect to the amount in

controversy.   See sec. 7430(c)(2)(A)(ii)(I).   Respondent concedes

that Martin substantially prevailed.
                                 - 5 -

     4.    Have net worth for individuals that does not exceed $2

million.   See sec. 7430(c)(2)(A)(iii); 28 U.S.C. sec.

2412(d)(1)(B) (1986).   Respondent concedes that Martin meets this

requirement.

     5.    Show that the taxpayer did not unreasonably protract

the proceedings.   See sec. 7430(b)(4).   Respondent concedes that

Martin meets this requirement.

     6.    Establish that the amount of costs and attorney's fees

claimed by the taxpayer is reasonable.    See sec. 7430(a), (c)(1).

Respondent agrees that the amounts Martin claimed are reasonable

except for certain costs respondent contends are unsubstantiated.

     A taxpayer has the burden of proving that he or she meets

each of these requirements before the Court may award litigation

costs under section 7430.    See Rule 232(e); Estate of Johnson v.

Commissioner, 985 F.2d 1315, 1318 (5th Cir. 1993); Gantner v.

Commissioner, 92 T.C. 192, 197 (1989), affd. 905 F.2d 241 (8th

Cir. 1990).

      Thus, to prevail, Martin must show that respondent's

position that the petition was valid as to Martin was not

substantially justified.    If Martin meets this requirement, he

must also show that the amount of costs and attorney’s fees that

he claimed is reasonable.
                               - 6 -

B.   Position of the United States and the Substantially
     Justified Standard

     Respondent contended in Martin v. Commissioner, supra, that

the petition was valid as to Martin because he authorized Berg to

sign and file the petition.   To be substantially justified, the

Commissioner's position must have a reasonable basis in both law

and fact.   See Pierce v. Underwood, 487 U.S. 552, 565 (1988);

Hanover Bldg. Matls., Inc. v. Guiffrida, 748 F.2d 1011, 1015 (5th

Cir. 1984); Powers v. Commissioner, 100 T.C. 457, 470, 473

(1993), affd. on this issue, revd. in part and remanded on other

issues 43 F.3d 172 (5th Cir. 1995).    For a position to be

substantially justified, there must be substantial evidence to

support it.   See Pierce v. Underwood, supra at 564-565; Powers v.

Commissioner, supra at 473.

     The fact that the Commissioner eventually loses or concedes

a case does not establish that a taxpayer is entitled to an award

of reasonable litigation and administrative costs.   See Wilfong

v. United States, 991 F.2d 359, 364 (7th Cir. 1993); Hanson v.

Commissioner, 975 F.2d 1150, 1153 (5th Cir. 1992); Sokol v.

Commissioner, 92 T.C. 760, 767 (1989).   However, it is a factor

to be considered.   See Estate of Perry v. Commissioner, 931 F.2d

1044, 1046 (5th Cir. 1991); Powers v. Commissioner, supra at 471.
                               - 7 -

C.   Whether Respondent's Position Was Substantially Justified

     1.    Reasonable Basis in Law

     We first decide whether respondent had a reasonable basis in

law for the contention that the petition was valid as to Martin.

Respondent cites Rule 33(b), Osborn v. United States Bank, 22

U.S. (9 Wheat.) 738, 830 (1824), and Gray v. Commissioner, 73

T.C. 639, 646-647 (1980), for the proposition that an attorney

who signs a petition is presumed to have authority to do so, and

that Berg’s signature is his representation that he was

authorized to represent Martin.   Rule 33(b) states in pertinent

part that:   “The signature of counsel also constitutes a

representation by counsel that counsel is authorized to represent

the party or parties on whose behalf the pleading is filed.”

Martin does not contend that respondent lacked a basis in law for

the contention that Berg was authorized to file the petition for

Martin.   We conclude that respondent had a reasonable basis in

law for contending that Berg was authorized to file the petition

on Martin’s behalf.

     2.    Reasonable Basis in Fact

     We next decide whether respondent had a reasonable basis in

fact to contend that the petition was valid as to Martin.   When

respondent filed the answer in this case, respondent knew that

Berg was an attorney and that he had signed the petition for

Rothhammer and Martin.   Respondent also knew that Bergman had
                                 - 8 -

filed a similar petition for Rothhammer and Martin for other

years and that Berg had been their attorney in that case, and

that Berg and his law firm had filed similar petitions for many

other taxpayers.   It was reasonable for respondent to believe

that Martin had authorized Berg to file the petition for Martin.

     Martin’s counsel told respondent’s counsel in April 1999

that Martin had not authorized or ratified the filing of the

petition in this case.   Respondent’s counsel spoke to Berg in

April 1999 and received subpoenaed documents from Berg’s law firm

in May 2000.   The documents appeared to be contrary to Martin’s

position because they included the docket number for this case.

      We conclude that respondent had a reasonable basis in fact

for the position that the petition was valid as to Martin on

grounds that Berg was authorized to sign the petition for Martin.

     3.   Martin’s Contentions

     Martin contends that respondent’s position was not

substantially justified because Berg did not attach to the

petition a copy of the notice of deficiency sent to Martin.

Martin contends that this violates Rule 34(b)(8) and, as a

result, that we lack jurisdiction over him.   We disagree.   Rule

34(b)(8) states that a copy of the notice of deficiency shall be

attached to the petition.   However, failure to attach to the

petition a copy of a notice of deficiency does not deprive this
                               - 9 -

Court of jurisdiction.   See, e.g., Secunda v. Commissioner, T.C.

Memo. 1977-185.

     Martin contends that Normac, Inc. v. Commissioner, 90 T.C.

142 (1988); and Estate of DuPuy v. Commissioner, 48 T.C. 918

(1967), establish that we lack jurisdiction.   We disagree.   In

those cases, after the 90-day period for filing a petition

expired, motions were filed to amend the petitions to contest

deficiencies for taxpayers or tax years omitted from the original

petitions.   The instant case is distinguishable because, here,

the petition stated that Martin contested the deficiency that

resulted from his and Rothhammer’s investment in

Elektra/Hemisphere, which was the same deficiency described in

the notice of deficiency sent to Rothhammer and attached to the

original petition.   We conclude that neither Rule 34(b)(8) nor

the cases cited by Martin establish that respondent’s position

was not substantially justified because a copy of the notice of

deficiency sent to him was not attached to the petition.

     4.   Conclusion

     Respondent had a reasonable basis in law and fact for the

position that Martin authorized Berg to sign and file the

petition on his behalf when respondent filed the answer and

throughout the judicial proceeding.6


     6
        We need not decide whether the number of hours billed by
Martin’s counsel and accountant and Martin’s other litigation
                                                   (continued...)
                             - 10 -

     We conclude that respondent’s position that the petition was

valid as to Martin was substantially justified.

     To reflect the foregoing,



                                             An appropriate order

                                        will be issued denying

                                        Martin’s motion for an

                                        award of litigation

                                        costs.




     6
      (...continued)
costs were reasonable in light of our conclusion that
respondent’s position was substantially justified.
