                       T.C. Memo. 2005-202



                      UNITED STATES TAX COURT



                  GARY R. DAVIS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 6343-04.             Filed August 24, 2005.



     Robert D. Grossman, Jr., for petitioner.

     Paul K. Voelker, for respondent.



                        MEMORANDUM OPINION


     LARO, Judge:   Petitioner moves the Court under section 7430

to award him litigation costs of $7,893.75.1    Respondent objects

to this motion, arguing:   (1) Petitioner did not exhaust his


     1
       Unless otherwise indicated, section references are to the
applicable versions of the Internal Revenue Code, and Rule
references are to the Tax Court Rules of Practice and Procedure.
                                 -2-

administrative remedies, (2) respondent’s position in this

proceeding was substantially justified, and (3) some of the

requested costs are unreasonable.      We ordered the parties to

stipulate the facts underlying this motion, and they have done

so.   We decide herein whether to grant petitioner’s motion.       We

shall not.

                             Background

      Most facts were stipulated.   We incorporate herein by this

reference the parties’ stipulation of facts and the exhibits

submitted therewith.    We find the stipulated facts accordingly.

Petitioner resided in Las Vegas, Nevada, when his petition was

filed with the Court.

      For approximately the 13-month period ending in or about

October 1999, petitioner and his then wife, Theresa Davis

(Davis), owned and resided in a home in Las Vegas at 4302

Callahan Avenue (4302 Callahan).    Petitioner and Davis separated

at the end of that period, and for approximately the next 2

months, Davis resided at 4302 Callahan, and petitioner resided

with relatives.   On December 16, 1999, The Gary R. Davis Living

Trust, Gary R. Davis Trustee, purchased a house in Las Vegas at

629 Mariola St. (629 Mariola).   Petitioner resided at 629 Mariola

from approximately December 1999 to approximately April 2003.

Petitioner and Davis sold the home at 4302 Callahan on

February 23, 2000, for $525,000.
                                -3-

     On or about April 15, 2001, petitioner filed a 2000 Federal

income tax return (2000 return) using the filing status of

“Single”.   Petitioner’s 2000 return was prepared by a certified

public accountant named Gary Campbell (Campbell).   Petitioner’s

2000 return reported that petitioner’s address was 4302 Callahan

and that his total income and taxable income were $6,524 and

zero, respectively.   Petitioner’s 2000 return reported that

petitioner’s total income consisted of taxable interest of $939,

ordinary dividends of $103, business income of $93,886 (gross

income of $208,170 less total expenses of $114,284), a capital

loss of $3,000, taxable individual retirement account (IRA)

distributions of $3,527, and passthrough losses totaling $88,931.

Respondent processed petitioner’s 2000 return on July 23, 2001.

     Respondent received certain information returns relating to

petitioner’s 2000 return.   In relevant part, respondent received:

(1)A 2000 Form W-2, Wage and Tax Statement, reporting that

petitioner had received wages of $165,586 and (2)a 2000 Form

1099-S, Proceeds From Real Estate Transactions, reporting that

petitioner had received $525,000 from the sale of 4302 Callahan.

On October 25, 2002, respondent mailed to petitioner at 4302

Callahan a Letter 2201(DO) (examination notice) stating that

petitioner’s 2000 return had been selected for examination.2    The


     2
       More specifically, the letter was addressed to petitioner
and Davis (then known as Theresa L. Ricci), attention petitioner.
                                 -4-

examination notice was an initial contact letter and did not

offer petitioner an opportunity to meet with respondent’s Office

of Appeals (Appeals).   One day before mailing the examination

notice to petitioner, respondent had checked his computer records

for petitioner’s address.    Those records listed petitioner’s

address as 629 Mariola.   Respondent did not mail an examination

notice to petitioner at 629 Mariola.

     Petitioner timely filed (pursuant to extensions) a joint

2001 Federal income tax return (2001 return).    Petitioner’s 2001

return was prepared by Campbell and reported that petitioner’s

address was 4302 Callahan.    Respondent received petitioner’s 2001

return on October 21, 2002, and processed it on November 18,

2002.

     On April 4, 2003, respondent checked his computer records

for petitioner’s address.    Those records listed petitioner’s

address as 4302 Callahan.    On the same day, respondent mailed a

Letter 915(DO) (30-day letter) for 2000 to petitioner at 4302

Callahan.   The 30-day letter informed petitioner that he could

request a conference with the Appeals Office and was accompanied

by two copies of the examination notice.    On September 19, 2003,

respondent mailed to petitioner at 4302 Callahan a Letter

1912(DO) that was accompanied by another copy of the examination

notice.   The Letter 1912(DO) stated that respondent’s Small

Business and Self-Employed Division had reviewed petitioner’s
                               -5-

2000 return and detected that respondent had not received

petitioner’s agreement to the proposed changes.   The Letter

1912(DO) stated that petitioner should contact the representative

designated on the letter within 10 days or that a notice of

deficiency would be issued to petitioner for 2000.   The Letter

1912(DO) referenced and was accompanied by a publication that

discussed the examination process and petitioner’s appeal rights.

On November 14, 2003, after not having received a response from

petitioner as to the Letter 1912(DO), respondent’s district

office closed petitioner’s case and recommended that a notice of

deficiency be issued to petitioner for 2000.

     Respondent received petitioner’s timely filed (pursuant to

extensions) joint 2002 Federal income tax return (2002 return) on

October 19, 2003, and processed it on November 24, 2003.

Petitioner’s 2002 return reported that petitioner’s address was

in Las Vegas at 912 Sir James Bridge Way (912 Sir James Bridge).

Petitioner had purchased 912 Sir James Bridge on April 7, 2003.

Petitioner had sold 629 Mariola on April 18, 2003.

     On January 15, 2004, respondent mailed a notice of

deficiency for 2000 to petitioner at 912 Sir James Bridge.     This

notice determined an income tax deficiency of $107,844 and a

section 6662(a) accuracy-related penalty of $19,740.60.    For the

most part, respondent determined in the notice that petitioner

was taxable on the sales proceeds reported on Form 1099-S and was
                                 -6-

not entitled to business expenses, itemized deductions, and

exemptions claimed on the 2000 return.    The parties now agree

that the deficiency and accuracy-related penalty are both zero.

                             Discussion

     Petitioner moves the Court under section 7430 to award him

litigation costs of $7,893.75.    We may grant this motion if he

meets all of the statutory requirements for such an award.    See

sec. 7430(a), (b), and (c); Rule 232(e); see also Corson v.

Commissioner, 123 T.C. 202, 205-206 (2004); Minahan v.

Commissioner, 88 T.C. 492, 497 (1987); Han v. Commissioner, T.C.

Memo. 1993-386.    The parties dispute the three requirements noted

supra pp. 1-2.    We focus on the first of those requirements;

namely, that a taxpayer exhaust administrative remedies available

within the Internal Revenue Service (IRS) before petitioning this

Court as to the underlying taxable year.    See sec. 7430(b)(1).

We conclude that petitioner has not met this requirement.

     Section 301.7430-1(b)(1), Proced. & Admin. Regs., interprets

section 7430(b)(1) to require generally that a party participate

in an Appeals Office conference, if one is available, before

petitioning this Court with respect to the underlying year.      See

Haas & Associates Accountancy Corp. v. Commissioner, 117 T.C. 48

(2001), affd. 55 Fed. Appx. 476 (9th Cir. 2003).    Section

301.7430-1(e)(2), Proced. & Admin. Regs., states in relevant part

that this requirement is met, in that a party’s administrative
                                -7-

remedies within the IRS are deemed to be exhausted for purposes

of section 7430, if

     The party did not receive a notice of proposed
     deficiency (30-day letter) prior to the issuance of the
     statutory notice [of deficiency] and the failure to
     receive such notice was not due to actions of the party
     (such as a failure to supply requested information or a
     current mailing address to the district director or
     service center having jurisdiction over the tax
     matter).

     We understand petitioner to argue that he has met this

requirement in that, he claims, he did not know his 2000 return

was under examination until he received the notice of deficiency.

According to petitioner, respondent sent all prior correspondence

for that year to an address that, petitioner claims, respondent

should have known was not petitioner’s address.   Petitioner

points to the fact that respondent’s records on October 24, 2002,

listed petitioner’s address as 629 Mariola, and he asserts that

this listing required that respondent after that date send all

correspondence (or at least copies of that correspondence) to

petitioner at that address.   Petitioner recognizes that

respondent processed petitioner’s 2001 return after October 24,

2002, and that this return reported petitioner’s address as 4302

Callahan.   Petitioner asserts that this reporting was an error

that he did not notice but that respondent should have known

about.

     We disagree with petitioner’s argument that he has met the

requirement as to exhausting administrative remedies within the
                                    -8-

IRS.       Although petitioner notes correctly that respondent

initially mailed the examination notice to petitioner at an

address different from that shown in respondent’s records, the

most critical fact is that respondent correctly mailed both the

30-day letter and the Letter 1912(DO) to petitioner’s most

recently reported address approximately 9 months and 4 months,

respectively, before issuing the notice of deficiency.       The

30-day letter (and possibly the Letter 1912(DO)), and not the

examination notice, allowed petitioner the opportunity to confer

with Appeals as to 2000 before the notice of deficiency was

issued.       Even if petitioner failed to receive either of these

letters, as he claims but which we decline to find as a fact, it

was not as he claims due to respondent’s lack of diligence; it

was due to petitioner’s own action of reporting 4302 Callahan as

his address on his 2001 joint return.3



       3
       Although we do not countenance the fact that respondent
mailed the examination notice to petitioner at an address that
was inconsistent with the address shown in respondent’s records,
and thus may have deprived petitioner of an opportunity to settle
this matter at the examination level, an award of litigation
costs does not necessarily follow from that action. A
prerequisite to petitioner’s award of litigation costs is that he
have participated in an Appeals Office conference, unless one was
not available, before petitioning this Court. We find as a fact
that an Appeals Office conference was available in that
respondent mailed both the 30-day letter and the Letter 1912(DO)
to petitioner’s most recently reported address approximately 9
months and 4 months, respectively, before issuing the notice of
deficiency. While petitioner claims to have failed to receive
either of these letters, it was due to his own action of
reporting 4302 Callahan as his address on his 2001 joint return.
                                -9-

     During the approximately 1-year period starting with the

date when respondent processed petitioner’s 2001 return reporting

the 4302 Callahan address and ending with the date when

respondent processed petitioner’s 2002 return reporting the 912

Sir James Bridge address, petitioner’s last known address was

4302 Callahan.4   Cf. Abeles v. Commissioner, 91 T.C. 1019 (1988);

sec. 301.6212-2, Proced. & Admin. Regs. (effective January 29,

2001) (absent “clear and concise notification of a different

address”, a taxpayer’s last known address is the one on the most

recently filed and processed tax return, with exceptions for

updated addresses obtained by respondent from an information bank

of the Postal Service).   During that period, respondent sent both

the 30-day letter and the Letter 1912(DO) to petitioner at 4302

Callahan.   While petitioner speculates that respondent should

have known that petitioner did not then live there because

respondent had previously been informed that petitioner and Davis

had sold the property, we do not agree.   The mere fact that

petitioner and Davis sold 4302 Callahan on February 23, 2000,

does not necessarily mean that petitioner never lived there

afterwards.   Such is especially so given the fact that Campbell,

petitioner, and petitioner’s wife who joined with him on the 2001


     4
       When respondent processed petitioner’s 2002 return,
petitioner’s last known address changed to 912 Sir James Bridge.
Respondent mailed the notice of deficiency to that address in
January 2004.
                              -10-

return each signed that return declaring under penalties of

perjury that he or she had “examined this return” and that it was

“true, correct, and complete”.5

     We hold that petitioner does not qualify for an award of

litigation costs under section 7430.   We have considered all

arguments for a contrary holding and find those arguments not

discussed herein to be irrelevant, without merit, or improperly

raised in petitioner’s reply to respondent’s objection.   To

reflect the foregoing,


                              An appropriate order will be

                         issued, and decision will be entered in

                         accordance with the parties’ settlement.




     5
       Petitioner also relies erroneously on the fact that
respondent knew before issuing the notice of deficiency that
petitioner had at least at one time resided at 629 Mariola. As
stated above, the reporting of the 4302 Callahan address on the
2001 return made that address petitioner’s address of record at
all relevant times thereafter.
