                           124 T.C. No. 17



                    UNITED STATES TAX COURT



    JOHN G. GOETTEE, JR. AND MARIAN GOETTEE, Petitioners v.
         COMMISSIONER OF INTERNAL REVENUE, Respondent*



    Docket No. 26591-96.                Filed May 31, 2005.


         Ps claimed investment credits and losses arising out of
    a partnership in which they held a limited interest. By
    notice of deficiency, R disallowed these claimed credits and
    losses. Ps accepted a settlement offer from R and paid all
    deficiencies and additions reflected in the entered
    decision. Ps requested abatement of interest on these
    amounts. R initially disallowed the abatement request in
    full, then later allowed partial abatement. Ps then paid
    the remaining assessed interest liabilities. Ps petitioned
    this Court to review R’s disallowance of interest
    abatements. After R’s concessions, we determined (1) R
    abused R’s discretion only for the period Jan. 24 through
    Apr. 24, 1995, and not for any of the other time periods
    (aggregating about 15-3/4 months) specifically put in issue,



     *
       This opinion supplements our previously filed opinions in
Goettee v. Commissioner, T.C. Memo. 1997-454, T.C. Memo. 2003-43
(hereinafter sometimes referred to as Goettee I), and T.C. Memo.
2004-9.
                                - 2 -


     and (2) R did not err in calculating the amounts of interest
     on any remaining issue raised by Ps.

          Ps move for an award of litigation costs.

          Held: Ps have not “substantially prevailed” with
     respect to the most significant issue or set of issues
     presented, nor have they “substantially prevailed”
     with respect to the amount in controversy. Sec.
     7430(c)(4)(A)(i), I.R.C. 1986. Consequently, Ps are not the
     “prevailing party” (sec. 7430(c)(4)(A), I.R.C. 1986), and
     are not entitled to an award of reasonable litigation costs.
     Sec. 7430(a)(2), I.R.C. 1986.



     Matthew J. McCann, for petitioners.

     William J. Gregg and Warren P. Simonsen, for respondent.



                               OPINION

     CHABOT, Judge:    This matter is before us on petitioners’

motion for an award of reasonable litigation costs pursuant to

section 74301 and Rule 231.2

     The issues for decision are:

          (1) Whether petitioners are the “prevailing party” for

     purposes of section 7430--in particular:

               (A)    Whether petitioners “substantially prevailed”


     1
       Unless indicated otherwise, all section references are to
sections of the Internal Revenue Code of 1986 as in effect for
proceedings commenced at the time the petition in the instant
case was filed.
     2
       Unless indicated otherwise, all Rule references are to the
Tax Court Rules of Practice and Procedure.
                               - 3 -

          with respect to either the most significant issue or

          set of issues or the amount in controversy, within the

          meaning of section 7430(c)(4)(A)(i), or

               (B)   Whether respondent established that

          respondent’s position was “substantially justified”

          within the meaning of section 7430(c)(4)(B)(i);

          (2) Whether petitioners unreasonably protracted the

     proceedings; and

          (3) Whether petitioners’ claimed costs are unreasonable

     or excessive.

     We reach issues (2) and (3) only if petitioners prevail, in

whole or in part, on issue (1).

     In their memorandum of law, petitioners requested a hearing

on their litigation costs motion, on the ground that “respondent

has not favored petitioners with the basis for disagreement with

any allegations contained in petitioners’ motion”, in violation

of Rule 232(b)(7).   Having examined the parties’ stipulations and

memoranda of law, we conclude that this litigation costs motion

may properly be resolved without an evidentiary hearing.    See

Rules 231(b)(8), 232(a)(2) (last sentence), and 232(b) (final

flush language).

                          Background

     The underlying facts of this case are set out in detail in

Goettee v. Commissioner, T.C. Memo. 1997-454, T.C. Memo. 2003-43,
                                 - 4 -

and T.C. Memo. 2004-9.     We summarize the factual and procedural

background briefly here and make additional findings as required

for our ruling on the instant motion.

        At all relevant times, petitioners resided in Maryland.

        Petitioners requested an abatement of interest with respect

to underpayments for 1978, 1979, 1981, 1982, and 1983, which

respondent partially disallowed, and petitioners petitioned this

Court under section 6404 to review that disallowance as to all 5

years.     In Goettee v. Commissioner, T.C. Memo. 1997-454, we

granted respondent’s motion for partial summary judgment as to

1978.     Petitioners later conceded as to 1983.   In Goettee I, what

remained before us was the matter of abatement of interest with

respect to the remaining 3 years (1979, 1981, and 1982) for the

periods of (1) December 2, 1993, through October 26, 1994, and

(2) December 14, 1994, through May 2, 1995.     In Goettee I,

petitioners also urged us to order abatement for unspecified

additional periods.     Finally, relying on our overpayment

jurisdiction in the interest abatement area (see sec.

6404(h)(2)(B)), petitioners also contended that respondent made

numerous computational errors in the interest calculations and

that failure to correct those errors constitutes an abuse of

discretion.     Respondent conceded that abatement was appropriate

for February 25 through April 25, 1995, but contended failure to

abate interest for the remaining time in dispute did not
                                - 5 -

constitute an abuse of discretion by respondent.   Respondent also

conceded some of the computational matters and disputed others in

whole or in part.    In Goettee I, we held for petitioners as to

January 25 through April 24, 1995,3 and for respondent as to all

the remaining time periods in issue.    Also in Goettee I, we held

for respondent as to all the computational matters that

respondent had not conceded.   In other words, in addition to the

time period and other matters conceded by respondent, we held for

petitioners only as to the 1-month period of January 25 through

February 24, 1995.   In Goettee v. Commissioner, T.C. Memo. 2004-

9, we denied petitioners’ motion that we reconsider our opinion

in Goettee I.

                      ____________________

     Petitioners have not substantially prevailed with respect to

the most significant issue or set of issues.

     Petitioners have not substantially prevailed with respect to

the amount in controversy.

                           Discussion

     The Congress has provided for the awarding of litigation

costs4 to a taxpayer who satisfies a series of requirements.    Sec.


     3
       In Goettee I, we refused to give effect to respondent’s
concession as to one of the days--Apr. 25, 1995. See Goettee I,
n.15.
     4
       Petitioners have requested only litigation costs in the
instant case, so we do not consider a possible award of
                                                   (continued...)
                                     - 6 -

7430.5


     4
     (...continued)
administrative costs.
         5
             Sec. 7430 provides, in pertinent part, as follows:

         SEC. 7430 AWARDING OF COSTS AND CERTAIN FEES.

               (a) In General.--In any administrative or court
         proceeding which is brought by or against the United States
         in connection with the determination, collection, or refund
         of any tax, interest, or penalty under this title, the
         prevailing party may be awarded a judgment or a settlement
         for--

                *       *       *        *     *       *          *

                     (2) reasonable litigation costs incurred
                in connection with such court proceeding.

                (b) Limitations.--

                *       *       *        *      *       *          *

                     (3) Costs denied where party prevailing protracts
                proceedings.--No award for reasonable litigation and
                administrative costs may be made under subsection (a)
                with respect to any portion of the administrative or
                court proceeding during which the prevailing party has
                unreasonably protracted such proceeding.

                *       *       *        *      *       *          *

                (c) Definitions.--For purposes of this section--

                *       *       *        *      *       *          *

                     (4) Prevailing party.--

                          (A) In general.--The term “prevailing party”
                     means any party in any proceeding to which
                     subsection (a) applies * * *--

                               (i) which-–

                                                            (continued...)
                                 - 7 -

     In general, the requirements of section 7430 are in the

conjunctive; i.e., the taxpayer must satisfy each of them in

order to succeed.   See Corson v. Commissioner, 123 T.C. 202, 205-


     5
     (...continued)
                                  (I) has substantially prevailed
                             with respect to the amount in
                             controversy, or


                                  (II) has substantially prevailed
                             with respect to the most significant
                             issue or set of issues presented, and

                             (ii) which meets the requirements of the
                        1st sentence of section 2412(d)(1)(B) of
                        title 28, United States Code * * *

                    (B) Exception if United States establishes
               that its position was substantially justified.--

                             (i) General rule.--A party shall not be
                        treated as the prevailing party in a
                        proceeding to which subsection (a) applies if
                        the United States establishes that the
                        position of the United States in the
                        proceeding was substantially justified.

          *         *        *       *       *       *       *

                    (C) Determination as to prevailing party.--
               Any determination under this paragraph as to
               whether a party is a prevailing party shall be
               made by agreement of the parties or–-

          *         *        *       *       *       *       *

                             (ii) in the case where such final
                        determination is made by a court, the court.

          *         *        *       *       *       *       *

               (6) Court proceedings.--The term “court
          proceeding” means any civil action brought in a court
          of the United States (including the Tax Court * * *).
                                - 8 -

206 (2004); Minahan v. Commissioner, 88 T.C. 492, 497 (1987).

Respondent concedes that petitioners (1) exhausted available

administrative remedies (sec. 7430(b)(1)) and (2) met the net

worth requirements (subpars. (A)(ii) and (D)(ii) of sec.

7430(c)(4)).    Respondent contends that (1) petitioners are not

“the prevailing party” because (A) petitioners did not

substantially prevail (sec. 7430(c)(4)(A)(i)) and (B)

respondent’s position “was substantially justified” (sec.

7430(c)(4)(B)(i)); (2) the amount of costs petitioners claim is

not reasonable (sec. 7430(a)(2)); and (3) petitioners

“unreasonably protracted such proceedings” (sec. 7430(b)(3)).

      In order to be entitled to an award of litigation costs, one

of the requirements is that petitioners have “substantially

prevailed”.    Although in general the requirements for an award

are in the conjunctive, the substantially prevailed requirement

is satisfied if petitioners satisfy either one of two statutory

alternatives.

      We proceed to consider first whether petitioners

substantially prevailed with respect to the most significant

issue or set of issues presented (sec. 7430(c)(4)(A)(i)(II)), and

then whether petitioners substantially prevailed with respect to

the amount in controversy (sec. 7430(c)(4)(A)(i)(I)).

A.   Most Significant Issue

      The parties have stipulated that they “agree that the most
                                 - 9 -

significant issue raised was whether Respondent abused its [sic]

discretion by denying Petitioners’ claims for abatement of

interest.”

     Petitioners assert that there were two aspects to

respondent’s abuse of discretion--(1) delay in performing

ministerial acts and (2) error in performing ministerial acts.

Petitioners point out that respondent conceded error in both

aspects, contend that petitioners prevailed on both aspects, and

conclude that they “satisfy the prevailing party requirement.

Bowden v. Comm’r, TCM 1999-30, citing Huckaby, 804 F.2d 297 (5th

Cir. 1986).”

     Respondent contends:

     Petitioners originally requested interest abatement of
     all assessed interest (other than the partial abatement
     granted by respondent’s Appeals Office) attributable to
     petitioners’ disallowed losses and credits claimed from
     their investment in Thompson Equipment Associates.
     Other than for a three-month period, petitioners were
     unsuccessful in their argument for interest abatement.
     Petitioners also argued for interest abatement derived
     from errors by respondent in the amount of interest
     computed. Respondent conceded before trial * * *
     [several small items listed]. Other than these
     concessions, all of petitioners’ arguments about errors
     in calculating interest in this case were rejected by
     the Court. Goetee, T.C. Memo. 2003-43, slip op. at 66,
     67, and 71. Petitioners did not substantially prevail
     as to the interest abatement and interest errors issues
     in this litigation.

     We agree with respondent.

     The instant case is brought under section 6404(h)(1), to

determine whether respondent’s “failure to abate interest under
                              - 10 -

this section was an abuse of discretion”.    The parties’

stipulation as to the most significant issue presented (sec.

7430(c)(4)(A)(i)(II)) basically tracks the statute’s language.

Thus, petitioners’ overall success controls whether they

substantially prevailed on the most significant issue presented.

We discuss individual elements of petitioners’ claims and what

became of these elements, but we do so for convenience of

analysis, with the focus being on the forest and not the

individual trees.

     Initially, petitioners proceeded pro se.    In their petition,

they requested abatement of interest as to 1978, 1979, 1981,

1982, and 1983.   After respondent’s motion for partial summary

judgment was granted and respondent’s motion to dismiss was

denied, petitioners retained their present counsel.     Goettee v.

Commissioner, T.C. Memo. 1997-454.     At the time of the first

partial trial in the instant case, petitioners’ trial memorandum

requested abatement of an aggregate of about $55,000 of interest

for 1979, 1981, and 1982, and ascribed this entirely to “delays

attributable in part to delay by IRS personnel in their

performance of ministerial acts.”    In their opening brief after

completion of the trial in the instant case, petitioners

contended that:

  2. Petitioners are entitled to an abatement of interest
     from December 2, 1993 to October 26, 1994, and December
     14, 1994 to April 25, 1995, and other periods due to
     delays by Respondent in performing ministerial acts.
                               - 11 -

  3. Petitioners are entitled to an abatement or correction
     of Respondent’s interest computation errors.

Petitioners’ opening posttrial brief listed a number of asserted

errors, the most significant of which appeared to be (1)

incorrect starting dates for interest computations as to all 3

years’ liabilities, and (2) respondent’s failure to pay interest

or provide offsets on account of a $40,000 settlement offer

amount which respondent held for about 7 months.   In petitioners’

motion for reconsideration of our opinion in Goettee I, they

specified about 2-1/2 months of delay periods in addition to the

16-1/4 months they had specified in their opening posttrial

brief.    See Goettee v. Commissioner, T.C. Memo. 2004-9, issues 2,

3, and 4.

     We agree with petitioners’ contention in their motion

papers:

     However, the government cannot avoid an award of
     litigation costs by conceding a matter when such
     concession is conditioned on terms unacceptable by the
     other party. See, Culpepper-Smith v. U.S.A., 50 F.
     Supp. 2nd 425, 430 (E.D. Pa 1999).

However, we do not determine that respondent in the instant case

improperly conditioned any concessions.   In evaluating the extent

of petitioners’ success we take into account those matters that

respondent conceded (whether early or late in the proceedings) as

well as the one contested matter as to which we held in part for

petitioners.

     Petitioners point to the fact that at one point during the
                               - 12 -

proceedings before the court respondent escalated the dispute by

indicating that petitioners owed almost $15,000 additional

interest and that “This was respondent’s position when trial

commenced”.    As petitioners note, this contention was raised

almost 2-1/2 years after the instant case was begun, was not

embodied in any document filed with the Court, and was conceded

by respondent at the start of the trial (about 2 weeks after this

contention was raised), before the first witness was called to

the stand.    This contention arose and vanished, without becoming

a part of the case; it never became part of what petitioners

asked this Court to require respondent to abate.   Under these

circumstances, we do not take this evanescent contention into

account in determining whether petitioners substantially

prevailed as to the most significant issue or set of issues

presented.

     Petitioners prevailed to some extent.   They achieved some

success on the delay periods and some success on the error

disputes.    However, these successes in the aggregate were barely

more than trivial compared to petitioners’ failures in the

litigation.   As to the delay periods, petitioners prevailed with

respect to 3 months, and respondent prevailed with respect to 15-

3/4 months.   Goettee I, issue I; Goettee v. Commissioner, T.C.

Memo. 2004-9, issues 2, 3, 4, and 5.    As to the major errors

disputes, petitioners prevailed on one starting date; respondent
                               - 13 -

prevailed on the two other starting dates and on the $40,000

settlement offer amount.   Goettee I, issues II.A. and III.     As to

the other errors disputes, petitioners prevailed on several

matters because of respondent’s concessions, and respondent

prevailed on all the unconceded items that went to opinion.

Goettee I, issue II.B.

     There is no indication in the record, and petitioners do not

contend, that any matter as to which petitioners prevailed--

whether by respondent’s concession or by our holding--would

significantly benefit petitioners in later years.    Cf. sec.

301.7430-5(h), Example (2), Proced. & Admin. Regs.

     We conclude that, taking into account respondent’s

concessions as well as our holdings, petitioners have not

substantially prevailed with respect to what they and respondent

have stipulated to be the most significant issue or set of issues

presented.

     Petitioners cite only one opinion on the issue of

substantially prevailing--Bowden v. Commissioner, T.C. Memo.

1999-30.   In Bowden, we held that the taxpayers lost on the most

significant issue presented.   In Bowden, we cited Bragg v.

Commissioner, 102 T.C. 715, 719-720 (1994), in which we also held

that the taxpayers lost as to the most significant issue or set

of issues presented.   Petitioners point out that in Bowden we

cited Huckaby v. United States, 804 F.2d 297 (5th Cir. 1986).      In
                             - 14 -

Huckaby v. United States, 804 F.2d at 300, the Court of Appeals

stated as follows:

     Huckaby, however, has prevailed on the primary issue:
     whether the government was liable for tax return
     disclosures that were given without written consent.
     Section 7430(c)(2)(A)(ii)(II) is phrased in terms of
     issues not claims. We therefore hold that Huckaby has
     met the second prong of the “prevailing party”
     requirement. [Emphasis in original.]

     We have not found, and petitioners have not directed our

attention to, any element in the instant case that plays a role

similar to the significance of the “written consent” issue in

Huckaby.

     In Wilkerson v. United States, 67 F.3d 112, 120 (5th Cir.

1995), the Court of Appeals stated as follows:

          Wilkerson has prevailed on her claim of wrongful
     levy, but failed on all her other claims, including
     wrongful disclosure. Although she sought a greater
     amount of damages for the disclosures, that fact alone
     does not make the disclosure issue most significant.
     See Huckaby, 804 F.2d at 299-300 (holding that a party
     was a “prevailing party” despite award of only $1,000
     out of possible $28,000 in damages). In order to
     determine which issue is most significant, we must
     determine which issue is primary or most nearly central
     to the case. See id. at 300 (holding an issue most
     significant because it was “the primary issue”).
     Looking at the gravamen of Wilkerson’s complaint, the
     primary issue was whether the levies on Wilkerson’s
     property were wrongful. The bulk of Wilkerson’s claims
     were in some way derived from the wrongfulness of the
     levies. For example, Wilkerson’s argues that she is
     entitled to recover under the Fifth Amendment because
     the levies caused her to lose her business without due
     process or just compensation. Likewise, Wilkerson
     based her claim of wrongful disclosure on a theory that
     the wrongfulness of the levies made the disclosures
     wrongful. Although we reject this position,
     Wilkerson’s complaint indicates the centrality of the
                              - 15 -

     levy issue. Accordingly, we hold that the wrongful
     levy issue was the most nearly central to her case.
     Having prevailed on the wrongful levy issue, Wilkerson
     has prevailed as to the most significant issue in the
     case.

     We have not found, and petitioners have not directed our

attention to, any element in the instant case that plays a role

similar to the significance of the “wrongful levy” issue in

Wilkerson.

     In the instant case, the parties have chosen by stipulation

to conflate all the different disputes--large, small, and

trivial--into one abuse of discretion issue.    In accordance with

the parties’ stipulation, we have evaluated the bits and pieces

of the claimed abuse of discretion and concluded that by any

reasonable measure of significance it was respondent and not

petitioners who substantially prevailed on the most significant

issue or issues presented.   Accordingly, the instant case is

properly distinguishable from Huckaby and Wilkerson.    Under these

circumstances, we need not, and we do not, examine into the

analysis presented in Scrimgeour v. Internal Revenue, 149 F.3d

318, 326-329 (4th Cir. 1998), relating to whether section 7430

applies to disputes of the sort presented in Huckaby.

     We hold for respondent on this issue.     Sec.

7430(c)(4)(A)(i)(II).
                                    - 16 -

B.     Amount in Controversy

        Petitioners do not contend that they substantially prevailed

with respect to the amount in controversy because, they state,

“no simple mathematical application of the ‘amount in

controversy’ test seems possible in connection with this interest

abatement claim.”

        Nevertheless, it may help to put this matter in perspective

to compare petitioners’ trial memorandum with the parties’ joint

Rule 155 computation.

                                    Table 1

Year     Petitioners’ Trial Memorandum      Joint      Overpayment As Percent
              “Interest Paid -             Rule 155    of Abatement Requested
           Abatement Requested”          Overpayment

1979               $36,520                $950.97            2.6
1981                 4,975                 456.23            9.2
1982                13,952               1,286.15            9.2

          Totals   55,447                2,693.35            4.9

        As table 1 shows, petitioners claimed in their trial

memorandum that they were entitled to an abatement of more than

$55,000 of the interest they paid for the 3 years remaining in

the case, but the parties’ joint Rule 155 computation shows that

they have been awarded not quite 5 percent of what they claimed.

        We do not attempt in the instant case to set forth a

universal definition of “amount in controversy” in interest

abatement cases.        See Dixson Corp. v. Commissioner, 94 T.C. 708,

715 (1990), as to deficiency cases.           But surely, in the setting

of the instant case, that amount is not less than the amount
                              - 17 -

petitioners claimed just before the start of the trial.   To

paraphrase our comment in Bragg v. Commissioner, 102 T.C. at 719,

no matter which method or manner of analysis we use, petitioners

come out substantially defeated.6   Petitioners’ defeat is all the

clearer when the $2,700 overpayment amount (even as enhanced by

interest accruing after May 6, 2003, per the parties’ agreement)

is compared to petitioners’ claim for almost $60,000 in

litigation costs.   See, e.g., Dang v. Commissioner, 259 F.3d 204,

206 (4th Cir. 2001), affg. an unreported order and decision of

this Court entered July 21, 2000.

     We hold, for respondent, that petitioners did not

substantially prevail with respect to the amount in controversy.

Sec. 7430(c)(4)(A)(i)(I).

C. Conclusion

     Petitioners have not “substantially prevailed” with respect

to either the amount in controversy or the most significant issue

or set of issues presented.   Accordingly, petitioners are not a

“prevailing party” for purposes of section 7430.   Because the

requirements of section 7430 are in the conjunctive, we need not


     6
       We note petitioners’ suggestion in their legal memorandum
that respondent’s concession of the additional $15,000 contention
“should affect any consideration of the amount in controversy
component of the test.” If we were to do so, adding that amount
to the totals, supra in table 1, would result in petitioners’
claiming relief of about $70,000 and obtaining relief of less
than $18,000. Even under this approach, petitioners would have
prevailed as to only one-fourth of the amount in controversy.
                              - 18 -

here discuss whether respondent’s position was “substantially

justified”, whether petitioners unreasonably protracted the

proceedings, or whether petitioners’ claimed costs are

unreasonable or excessive.   Also, we do not consider whether or

to what extent the analysis in Fla. Country Clubs, Inc. v.

Commissioner, 122 T.C. 73 (2004), affd. 404 F.3d 1291 (11th Cir.

2005), relating to deficiency cases, applies in interest

abatement cases.

     For the above reasons, we hold petitioners are not entitled

to litigation costs.

     To reflect the foregoing,


                                      An appropriate order and

                                 decision will be entered denying

                                 petitioners’ motion for award of

                                 litigation costs, as supplemented,

                                 and determining overpayments in

                                 accordance with the filed joint

                                 Rule 155 computations.
