                            106 T.C. No. 25



                      UNITED STATES TAX COURT


          PAUL FREHE ENTERPRISES, INC., Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent


     Docket No. 22080-91.                 Filed June 13, 1996.




     Jack H. Kaufman, for petitioner.

     Linda L. Conway and James J. Posedel, for respondent.




          Petitioner moved for award of reasonable
     litigation costs in a so-called actuarial case.
     Held, respondent's position was substantially
     justified. Held, further, petitioner's motion for
     award of reasonable litigation costs is denied.


                                OPINION

     CLAPP, Judge:   This case is before us on petitioner's Motion

for Award of Reasonable Litigation Costs pursuant to section 7430

and Rules 230 through 232.
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     After concessions by respondent, we must decide whether

respondent's litigating position was "not substantially

justified", as that phrase is used in section 7430(c)(4)(A)(i).

If that question is resolved in favor of petitioner, then we must

decide whether the amount of costs and attorney's fees claimed by

petitioner is reasonable.

     All section references are to the Internal Revenue Code, and

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

Procedure.   References to section 7430 are to that section as

amended by section 1551 of the Tax Reform Act of 1986, Pub. L.

99-514, 100 Stat. 2752 (effective for proceedings commenced after

December 31, 1985), and by section 6239 of the Technical and

Miscellaneous Revenue Act of 1988, Pub. L. 100-647, 102 Stat.

3743-3746 (effective for proceedings commenced after November 10,

1988).

     Section 7430(a) authorizes the Court to award reasonable

administrative costs and reasonable litigation costs to taxpayers

who prevail against the United States in civil tax litigation.

To obtain an award of litigation costs taxpayers must prove that

they are the "prevailing party" within the meaning of section

7430(c)(4), which requires, inter alia, that they establish that

the Commissioner's position in the proceeding was not

substantially justified.

     The position taken by the United States, for purposes of

administrative costs, refers to the position taken in an
                                    3

administrative proceeding, determined in this case as of July 22,

1991, the date of the notice of deficiency.        Sec.

7430(c)(7)(B)(ii).    The position taken by the United States, for

purposes of litigation costs, refers to the position of the

Unites States in a judicial proceeding.        Sec. 7430(c)(7)(A).   A

judicial proceeding is commenced in this Court with the filing of

a petition.    Rule 20(a).   Generally, the Commissioner takes a

position on the date the answer is filed.         Huffman v.

Commissioner, 978 F.2d 1139, 1148 (9th Cir. 1992), affg. in part

and revg. in part T.C. Memo. 1991-144.        In order to recover

administrative costs and litigation costs, the taxpayer must

establish that the position of the United States was not

substantially justified both in the administrative and court

proceedings.    Id. at 1143-1147.       It is not entirely clear from

petitioner's motion whether petitioner seeks the recovery of

reasonable administrative costs.        The ambiguity does not change

our analysis.    Respondent contends, and petitioner does not

dispute, that the position taken in her answer, filed November

22, 1991, did not differ from the position taken in the notice of

deficiency.    In both, respondent maintained that petitioner had

not demonstrated entitlement to the deductions for contributions

to a qualified retirement plan.

     Petitioner's case is one of many so-called actuarial cases

which resulted from respondent's actuarial project involving the

reasonableness of actuarial assumptions in connection with
                                  4

deductions for contributions to individual defined benefit

pension plans.

     Many of the issues raised in petitioner's Motion for Award

of Reasonable Litigation Costs were answered by this Court in

Price v. Commissioner, 102 T.C. 660, 662-665 (1994), affd.

without published opinion sub nom. TSA/Stanford Associates, Inc.

v. Commissioner, 77 F.3d 490 (9th Cir. 1996).       There is no need

to repeat that discussion.

     The statutory notice of deficiency in this case was issued

by respondent on July 22, 1991.       The petition was filed on

September 30, 1991.   In June of 1995, respondent made a full

concession of the underlying actuarial issues.       A decision of no

deficiency in income tax and no additions to tax was signed by

petitioner's counsel on June 29, 1995, and by respondent's

counsel on July 13, 1995, and was filed with this Court as a

Settlement Stipulation on July 18, 1995.

     During this intervening period prior to respondent's

concession, the following cases were decided by this Court in

favor of the taxpayers and were affirmed by the Courts of Appeals

for the Fifth, Second, and Ninth Circuits:       Vinson & Elkins v.

Commissioner, 99 T.C. 9 (1992), affd. 7 F.3d 1235 (5th Cir.

1993); Wachtell, Lipton, Rosen & Katz v. Commissioner, T.C. Memo.

1992-392, affd. 26 F.3d 291 (2d Cir. 1994); and Citrus Valley

Estates v. Commissioner, 99 T.C. 379 (1992), affd. in part and

remanded in part 49 F.3d 1410 (9th Cir. 1995).       These were
                                         5

considered the lead actuarial cases.            The parties selected the

lead actuarial cases as a group in order to raise all or

substantially all issues necessary to resolve the hundreds of

actuarial cases pending across the country.             The parties

contemplated and understood that the lead actuarial cases were

considered a package.           The relevant dates for these cases are as

follows:
                    Tax Court       Tax Court
                     Opinion        Decision    Appealed by      Disposition
                      Filed         Entered     Commissioner      on Appeal

Vinson & Elkins      7/14/92        9/14/92       12/10/92        11/29/93
Wachtell, Lipton     7/14/92        2/16/93       05/12/93        06/06/94
Citrus Valley        9/29/92        2/23/93       05/19/93        03/08/95


      The District Court for the Western District of Michigan

decided the issue of reasonableness of actuarial adjustments in

favor of the taxpayers.           Rhoades, McKee & Boer v. United States,

822 F. Supp. 445 (W.D. Mich. 1993), affd. in part and revd. in

part and remanded 43 F.3d 1071 (6th Cir. 1995).                On remand,

however, the District Court found that the actuarial assumptions

used were not reasonable in the aggregate.             Rhoades, McKee & Boer

v. United States, 76 AFTR 2d 95-6394, 95-2 USTC par. 50,486 (W.D.

Mich. 1995).       We also note that in 1989 the Court of Appeals for

the Seventh Circuit found in favor of the Commissioner on similar

issues.    Jerome Mirza & Associates, Ltd. v. United States, 882

F.2d 229 (7th Cir. 1989).

      Neither the Court of Appeals for the Fifth Circuit's opinion

in Vinson & Elkins, nor the Court of Appeals for the Second
                                   6

Circuit's opinion in Wachtell, Lipton produced well-defined

conflicts with the Court of Appeals for the Seventh Circuit's

opinion in Jerome Mirza.    By May 19, 1993, the Commissioner had

appealed Citrus Valley, which presented an acknowledged conflict

with the Court of Appeals for the Seventh Circuit's opinion in

Jerome Mirza.    Citrus Valley also presented issues similar to

those decided in Vinson & Elkins and Wachtell, Lipton.    Under

these circumstances, respondent's decision to await the outcome

on appeal of the lead actuarial cases, including Citrus Valley,

before settling this case was substantially justified.   A failure

by the Commissioner or the taxpayers to pursue any of the lead

cases to a definitive conclusion would have defeated the purpose

of the litigation format.

     Our opinion in Citrus Valley Estates v. Commissioner, supra,

was affirmed by the Court of Appeals for the Ninth Circuit on

March 8, 1995.   The period in which the Commissioner might have

filed a petition for writ of certiorari did not expire until June

7, 1995.   Following the Commissioner's decision not to seek

certiorari, a concession letter was sent to petitioner's counsel

on June 14, 1995, which resulted in the aforesaid Settlement

Stipulation filed July 18, 1995.

     Respondent's position with respect to actuarial assumptions

in this case was the same as her position in Vinson & Elkins,

Wachtell, Lipton, and Citrus Valley.    The Commissioner's position

had merit and was competently presented at trial and argued on
                                 7

brief, though ultimately unsuccessful.   Having decided not to

apply to the Supreme Court of the United States for certiorari,

respondent moved very promptly following the expiration of the

time for filing a petition for writ of certiorari to send a

letter to petitioner's counsel conceding this case.    In this

case, the concession came within a matter of days.    From this

Court's firsthand knowledge of the disposition of hundreds of

these actuarial cases, it is clear that respondent has moved

quickly and with dispatch.   Under these circumstances, a taxpayer

would be hard pressed to establish that the Commissioner's

litigating position was maintained for an excessive period of

time following her decision to concede the actuarial cases and

hence was not substantially justified.

     It is noted that the settlement in Price v. Commissioner,

supra, occurred when the case was called for trial on June 24,

1993.   That date was prior to the affirmances in Vinson & Elkins,

Wachtell, Lipton, and Citrus Valley, all of which were decided in

favor of the taxpayers.   The decision in Jerome Mirza &

Associates, Ltd. v. United States, supra, favoring the

Commissioner had been on the books since 1989.   In Price, we

said:

          Under the foregoing circumstances, we think it
     clear that had respondent decided to continue
     litigating the instant cases to an unsuccessful
     conclusion on the substantive issue, she would have
     been justified in so doing at least as long as there
     was no further definitive action on that issue at the
     appellate level. [102 T.C. at 664.]
                                 8

A final definitive action at the appellate level in the lead

actuarial cases occurred on June 7, 1995, when the time expired

for filing a petition for writ of certiorari in Citrus Valley.

Thus, our discussion above and Price adequately cover the

additional actions and nonactions which took place in the 2 years

following the date Price was filed, up to the settlement of the

present case.

     Respondent's position was substantially justified.

Petitioner's Motion for Award of Reasonable Litigation Costs will

be denied.   We need not reach the further question as to the

amount of such costs.

                               An order denying petitioner's

                          Motion for Award of Reasonable

                          Litigation Costs and a decision in

                          accordance with the settlement

                          stipulation of the parties will be

                          entered.
