                     T.C. Summary Opinion 2001-95



                       UNITED STATES TAX COURT



               CLARENCE MICHAEL CHERVENY, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7621-99S.                        Filed June 26, 2001.


     Clarence Michael Cherveny, pro se.

     Michael O'Donnell, for respondent.


     PAJAK, Special Trial Judge: This case was heard pursuant to

section 7463.    Unless otherwise indicated, all section references

are to the Internal Revenue Code in effect for the year in issue,

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

and Procedure.    The decision to be entered is not reviewable by

any other court, and this opinion should not be cited as

authority.

     This case is before the Court pursuant to petitioner's oral
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motion for litigation costs under section 7430 and Rules 230

through 233.   Petitioner claimed litigation costs of $60 for the

Tax Court filing fee.

     The underlying issues raised in the petition were settled by

a stipulation of settled issues.   At the time the petition was

filed, petitioner resided in Streator, Illinois.

     By notice of deficiency, respondent determined a deficiency

in petitioner's Federal income tax of $735 for the taxable year

1996.   Respondent conceded that there was no deficiency in income

tax due from petitioner.

     Under section 7430, a taxpayer may be awarded a judgment for

reasonable litigation costs if the taxpayer establishes certain

criteria and if the Commissioner’s position was not substantially

justified.   Respondent contends that his position was

substantially justified.   Respondent concedes that petitioner has

satisfied the other requirements of section 7430.

     In 1995, petitioner was involved in a labor dispute with his

employer.    In July 1996, the employer sent petitioner a check in

the gross amount of $4,889.98, which netted out to $3,000 after

withholding and payroll deductions.     The payment was designated

as a final settlement of all claims against his employer arising

out of petitioner's termination of employment.    Petitioner

refused to accept the check because he did not want to give up

his right to pursue legal remedies against his former employer.
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The check was returned to the former employer.    In 1998, the

check was re-issued to petitioner by his former employer.

Petitioner accepted the 1998 check.     A notation on the bottom of

the statement attached to the check indicated that "taxes applied

to 1996 earnings".

     The Internal Revenue Service (IRS) received a Form W-2, Wage

and Tax Statement, which indicated that the employer paid

petitioner $4,889.98 in 1996.    This information became the basis

of the 30-day letter issued to petitioner on September 23, 1998.

On October 16, 1998, petitioner responded to the letter and

enclosed a copy of the second check, written by his former

employer in 1998.    On November 24, 1998, respondent asked

petitioner to get a corrected Form W-2 from his employer.

Respondent needed further verification because respondent did not

consider the 1998 check to be proof that the 1996 check had been

an accord and satisfaction and had never been cashed.    Petitioner

replied on December 1, 1998, and stated that he wanted answers

before he would sign anything or would do what he considered to

be the IRS' function.    Absent further verification from

petitioner, the notice of deficiency was issued on February 3,

1999.

     When petitioner met with respondent, he was able to show the

facts necessary for respondent to concede the issue.    However,

petitioner would not sign the stipulation of settled issues
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because respondent would not agree to the $60 of litigation

costs.    Ultimately, petitioner and respondent signed the

stipulation of settled issues.

     In deciding the merits of a motion for litigation costs, the

Court generally considers the reasonableness of the

Commissioner’s position from the date the answer was filed.

Huffman v. Commissioner, 978 F.2d 1139, 1148 (9th Cir. 1992),

affg. in part, revg. in part, and remanding T.C. Memo 1991-144.

No answer was required in this case which was tried under the

small tax case procedures.    Rule 175(b).   Accordingly,

respondent's position for the purpose of the motion is the

position maintained by respondent during the pendency of this

case.    There is nothing in the record that suggests that

respondent's position changed from that taken in the notice of

deficiency, so these positions are, in effect, the same.     In the

notice of deficiency, respondent took the position that the

$4,889 reported by petitioner's employer was taxable wages to

petitioner in 1996.

     Whether the Commissioner’s position was substantially

justified turns on a finding of reasonableness, based upon all

the facts and circumstances, as well as the legal precedents

relating to the case.    Pierce v. Underwood, 487 U.S. 552, 565

(1988); Swanson v. Commissioner, 106 T.C. 76, 86 (1996).     A

position is substantially justified if the position is "justified
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to a degree that could satisfy a reasonable person."       Pierce v.

Underwood, supra at 565.     The Court must "consider the basis for

respondent's legal position and the manner in which the position

was maintained."     Wasie v. Commissioner, 86 T.C. 962, 969 (1986).

The reasonableness of the Commissioner’s position and conduct

necessarily requires considering the facts available to the

Commissioner at that time.     Coastal Petroleum Refiners, Inc. v.

Commissioner, 94 T.C. 685, 689 (1990); DeVenney v. Commissioner,

85 T.C. 927, 930 (1985).     Whenever there is a factual

determination, the Commissioner is not obliged to concede a case

until the Commissioner receives the necessary documentation which

proves the taxpayer's contentions.       Brice v. Commissioner, T.C.

Memo. 1990-355, affd. without published opinion 940 F.2d 667 (9th

Cir. 1991); Currie v. Commissioner, T.C. Memo. 1989-23.      The fact

that the Commissioner eventually loses or concedes a case does

not establish an unreasonable position.      Sokol v. Commissioner,

92 T.C. 760, 767 (1989).

     In this case, respondent received third party payer

information, the Form W-2, which stated that petitioner received

taxable wages of $4,889.98 in 1996.      Respondent attempted to

verify the information with petitioner and asked petitioner to

provide substantiation that he did not receive the money.

Petitioner produced only a copy of the second check that was

dated in 1998.     Respondent was justified in not accepting the
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copy of the second check as evidence that the first check was

never cashed.   When respondent did receive adequate

substantiation from petitioner that petitioner did not receive

the money, respondent conceded the issue.   It was reasonable for

respondent to rely on the third party payer information and to

request proof from petitioner that he did not receive the amount

reported.    Sher v. Commissioner, 861 F.2d 131 (5th Cir. 1988),

affg. 89 T.C. 79 (1987).   Respondent was under no obligation to

concede the case prior to receiving the documentation which

proved petitioner's contentions.

     Based on the record, we find that respondent's position was

substantially justified.   Consequently, petitioner’s motion will

be denied.

     Reviewed and adopted as the report of the Small Tax Case

Division.

                                          An appropriate order and

                                     decision will be entered.
