                 IN THE UNITED STATES COURT OF APPEALS

                           FOR THE FIFTH CIRCUIT

                       _________________________

                              No. 94-40005
                              No. 94-40006
                              No. 94-40007
                          (Consolidated cases)
                       _________________________

M. LANE POWERS,
                                                Petitioner-Appellant,

                                   versus


COMMISSIONER OF INTERNAL REVENUE,

                                           Respondent-Appellee.
         ____________________________________________________

                      Appeal from the Decisions
                    of the United States Tax Court
          __________________________________________________
                           (April 13, 1995)

Before GARWOOD, JOLLY and STEWART, Circuit Judges.

CARL E. STEWART, Circuit Judge:

     In    our   opinion    in   this   case,   reported   at   Powers   v.

Commissioner, 43 F.3d 172 (5th Cir. 1995), we concluded that

taxpayer M. Lane Powers, as a prevailing party, was entitled to the

litigation costs that related to his success on appeal.1            Of the

issues in dispute in the consolidated appeal, we determined that

Powers had prevailed on the NOL carryback issue, on three out of

the four time periods at issue for which the tax court had not

awarded fees, but that he had lost on the hourly fee issue.              We

found that his losses were not of such magnitude so as to deprive


     1
        26 U.S.C. § 7430 authorizes such an award to a prevailing
party in tax litigation against the Internal Revenue Service.
him of prevailing party status under § 7430.             Thus, we invited

Powers to submit an application for attorneys' fees and costs,

providing us with information on costs expended on his appeal.

      The government argues in its opposition to the fee application

that Powers should not be entitled to anything for his fees on

appeal relating to the net operating loss carryback issue because

its   position   was    not   unreasonable    on    this       issue.    The

"reasonableness" or "substantial justification" of the government's

position in defending this appeal is an appropriate inquiry under

§ 7430.   The mere fact that a taxpayer prevails on appeal does not

automatically entitle him to attorney's fees.

       The government argues that it was not acting unreasonably in

challenging Powers on the carryback issue, and that the Tax Court's

finding in its favor on the carryback issue supports its position.

In Huckaby v. Commissioner, 804 F.2d 297 (5th Cir. 1986), we

observed that a victory in the lower court does not automatically

mean the IRS acted reasonably.         The government's position can be

unreasonable if its arguments "rang hollow or were specious or

defied its own regulations." (emphasis added) Huckaby at 299.             In

our opinion in the case at bar, we found that the Treasury

Regulations require that the correct section of the Internal

Revenue Code be cited in an election to carry forward a net

operating loss and to waive the right to carryback.             Nonetheless,

the government maintained that a proper election had been made even

though the wrong code section was cited in the taxpayer's purported

election.    Under     Huckaby,   we   conclude   that   the    government's


                                       2
position   before      the   Tax    Court       and   on   appeal   defied    its    own

regulation and was thus unreasonable.2

     In his application, Powers requests $20,076.35, or 80%, of a

total expenditure of $25,095.44.                  He arrives at this figure by

noting that he was entirely successful in cases 94-40005 and 94-

40006 (tax years 1976 and 1977), which primarily involved the NOL

carryback issue.        He contends that these two cases represent two

thirds of the appeal, because there were three consolidated cases

on appeal, and that he should receive reimbursement for two-thirds

of his fees and costs for his victory on the NOL carryback issue.

Powers seeks an additional 12.5% of his fees for his partial

success    in   case     94-40007,     representing          the    1978     and    1979

litigation.     Rounding off these two amounts to 80% would give

Powers the relief he seeks.

     The Government strenuously objects to the amount Powers seeks.

They argue that the carryback issue did not constitute two thirds

of the appeal, and that we should not calculate fees in terms of

the cases appealed from.           Instead, we should look at the issues on

which Powers prevailed.            The government is correct under the case

law and Section 7430.        See e.g., Heasley v. Commissioner, 967 F.2d

116 (5th Cir. 1992), and Huckaby v. U.S. Dept. of Treasury, supra,

804 F.2d at 300.       This view is also consistent with our opinion, in


     2
        Although our opinion in this case did not expressly state
that we found the government's position unreasonable, such a
finding was both inherent and implicit in view of the fact that we
concluded that Powers was entitled to litigation costs for his
victories on appeal and invited him to submit an application for
these costs.

                                            3
which   we   analyzed    the   number    of   issues   on    which      Powers   had

prevailed in order to determine whether he was entitled to fees at

all.

       This case involved three primary issues: the carryback issue,

the number of hours awarded, and the hourly rate.                 For purposes of

our analysis, we have assigned each issue equal weight.                       Powers

prevailed on the carryback issue, entitling him to one third of

total expenditures for his victory on that issue.                       That issue

represents one third of the total fees, or 1/3 of $25,095.44, which

equals $8,365.15.        Powers also won on three of the four time

periods,     entitling   him    to    three   fourths       of    the   one    third

attributable to that issue.          One third of $25,095.44 is $8,365.15.

Three fourths of that one third is $6,273.86.                    Powers should be

entitled to this amount on the issue of the number of hours.                     He

lost on the hourly rate issue and therefore recovers nothing for

that issue.     Thus, Powers should be entitled to $8365.15 (full

amount attributable to carryback issue) and $6273.86 (three fourths

of the amount attributable to the number of hours issue), for a

total of $14,639.01.

       IT IS ORDERED that Powers is hereby awarded $14,639.01 for

litigation costs on appeal.




                                        4
GARWOOD, Circuit Judge, concurring in part and dissenting in part:



     I join in all of the Court's per curiam except the portion

thereof dealing with the net operating loss carryback issue. In my

view, the resolution of this issue presented an extremely close

question,   and   I   am   unable   to       conclude   that   the   government's

position in regard thereto, though it ultimately did not prevail,

was either unreasonable or without substantial justification.




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