                        T.C. Memo. 2002-110



                      UNITED STATES TAX COURT



                THU CUC THI HUYNH, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 12535-00.             Filed May 1, 2002.


     Bruce E. Gardner, for petitioner.

     Lindsey D. Stellwagen, for respondent.



                        MEMORANDUM OPINION


     ARMEN, Special Trial Judge:    This matter is before the

Court on petitioner’s motion for an award of administrative and

litigation costs, filed pursuant to section 7430 and Rules 230

through 233.1   Petitioner seeks an award of $15,222 in respect of


     1
        Unless other indicated, all section references are to the
Internal Revenue Code, as amended; however, references to sec.
7430 are to such section in effect at the time that the petition
                                                   (continued...)
                                - 2 -

respondent’s deficiency determination of $2,347.

     After concessions by respondent,2 the issues for decision

are as follows:

     (1) Whether respondent's position in the administrative and

court proceedings was substantially justified.

     (2) Whether petitioner exhausted her administrative

remedies.

     (3) Whether petitioner unreasonably protracted the

administrative and court proceedings.

     (4) Whether the administrative and litigation costs claimed

by petitioner are reasonable.

     Neither party requested an evidentiary hearing, and the

Court concludes that such a hearing is not necessary for the

proper disposition of petitioner’s motion.   See Rule 232(a)(2).

We therefore decide the matter before us based on the record that

has been developed to date.

     Petitioner resided in Alexandria, Virginia, at the time that

her petition was filed with the Court.




     1
      (...continued)
was filed (Dec. 6, 2000). All Rule references are to the Tax
Court Rules of Practice and Procedure.
     2
       Respondent concedes: (1) Petitioner substantially
prevailed, see sec. 7430(c)(4)(A)(i); and (2) petitioner
satisfied the applicable net worth requirement, see sec.
7430(c)(4)(A)(ii).
                               - 3 -

Background

     As a preliminary matter, we note that petitioner’s motion

for an award of costs arises in the context of a deficiency

action in which the only taxable year in issue is 1999.

Nevertheless, the theory behind petitioner’s motion requires that

we also consider the taxable year 1998.

     A.   Petitioner

     Petitioner is a low-income individual who, during 1998 and

1999, worked as a “nail technician” (a manicurist) in various

“nail salons” in northern Virginia.    Petitioner is the daughter

of Tra Thi Nguyen (Mrs. Nguyen); petitioner is also the single

parent of a son, Hai Minh Huynh (Hai), who was born in 1990.

     B.   Petitioner’s Tax Return for 1998

     In February 1999, petitioner filed a U.S. Individual Income

Tax Return, Form 1040, for the taxable year 1998.   On her return,

petitioner claimed: (1) Head of household filing status; (2) the

standard deduction for that filing status; (3) dependency

exemptions for Mrs. Nguyen and Hai; and (4) an earned income

credit based on her son as a “qualified child”.    Petitioner also

claimed a refund of tax in the amount of $1,609.

     Petitioner’s 1998 return was selected for examination.    By

letter dated April 23, 1999, respondent proposed to: (1) Change

petitioner’s filing status from head of household to single (and

allow only the standard deduction for the latter filing status);
                                - 4 -

and (2) disallow the two dependency exemptions and the earned

income credit.   Concurrently, respondent requested specific

information and documentation from petitioner to substantiate the

filing status, dependency exemptions, and earned income credit as

claimed on her return.

     Petitioner either failed to respond or failed to respond

adequately to respondent’s request.     Accordingly, in September

1999, respondent determined a deficiency in petitioner’s income

tax for 1998.    The deficiency was attributable to the adjustments

proposed in respondent’s April 23, 1999, letter.

     In December 1999, petitioner commenced a case in this Court

by filing a petition for redetermination.     See sec. 6213(a).

Petitioner’s case was assigned docket No. 18517-99S.     In her

petition, petitioner alleged that she provided her son’s “entire

support”.

     Petitioner’s case was considered by respondent’s Appeals

Office at the Philadelphia Service Center.     In due course, the

case was settled by respondent’s concession that petitioner was

entitled to the refund of tax as claimed on her return.     A

stipulation to that effect was filed by the parties on October 2,

2000.   On the following day, the Court entered decision “pursuant

to the stipulation of the parties”.
                                - 5 -

     C.   Petitioner’s Tax Return for 1999

     In March 2000, petitioner filed a U.S. Individual Income Tax

Return, Form 1040, for the taxable year 1999.    On her return,

petitioner claimed: (1) Head of household filing status; (2) the

standard deduction for that filing status; (3) a dependency

exemption for Hai (but not for Mrs. Nguyen); and (4) an earned

income credit based on her son as a “qualifying child”.

Petitioner also claimed a refund of tax in the amount of $2,177.

     Petitioner’s 1999 return was selected for examination.    By

letter dated April 21, 2000, respondent sent petitioner an

examination report in which respondent proposed to: (1) Change

petitioner’s filing status from head of household to single (and

allow only the standard deduction for the latter filing status);

and (2) disallow the dependency exemption and the earned income

credit.   In the letter, respondent also advised petitioner that

if she disagreed with the proposed changes, respondent would

consider whatever information and documentation that she might

care to submit.    In this regard, respondent provided petitioner

with Form 886-H, Supporting Documents, that outlined the type of

information and documentation relevant to resolving issues

related to filing status, dependency exemptions, and the earned

income credit.    Finally, respondent advised petitioner of her

right to appeal administratively the proposed changes and

enclosed with the letter a copy of Publication 5, Your Appeal
                               - 6 -

Rights and How To Prepare a Protest If You Don’t Agree.

     On May 22, 2000, petitioner responded to respondent’s April

21, 2000, letter by providing certain information and

documentation.   This material included a landlord’s rental

payment ledger, a statement history from Virginia Power showing

subsidies for “Energy Assistance”, and a “Certificate of

Enrollment” from the Fairfax County Public Schools regarding

petitioner’s son.   By letter dated June 1, 2000, respondent

acknowledged receipt of this material and promised to respond by

July 1, 2000.

     The information and documentation provided by petitioner was

analyzed by one of respondent’s tax examiners.   In a worksheet

dated June 23, 2000, the tax examiner expressed a number of

concerns regarding that material.   The examiner’s concerns

included (but were not limited to) the following: (1) The

landlord’s rental payment ledger identified Mrs. Nguyen, rather

than petitioner, as the lessee and as the person who paid the

rent; and (2) the rental payment ledger did not disclose the

number of individuals who occupied the unit.

     By letter dated June 23, 2000, respondent advised petitioner

that additional information would be required if respondent were

to rescind the proposed changes to petitioner’s return.

Respondent enclosed with the letter Form 886A, Explanation of

Items, and specifically requested copies of canceled checks to
                               - 7 -

verify rental and utility payments.    Finally, respondent again

advised petitioner of her right to appeal administratively the

proposed changes and enclosed another copy of Publication 5.

     Petitioner did not respond to respondent’s June 23, 2000,

letter, nor did petitioner administratively appeal the proposed

changes to her 1999 return.   Accordingly, on October 6, 2000,

respondent sent petitioner a notice of deficiency.

     The deficiency as determined by respondent was in the amount

of $2,347 and was based on the same adjustments as proposed in

respondent’s April 21, 2000, letter; i.e., change in petitioner’s

filing status from head of household to single (with a

concomitant change in the amount of the standard deduction) and

disallowance of the dependency exemption and the earned income

credit in respect of petitioner’s son.

     On October 23, 2000, petitioner retained her present

counsel.   Shortly thereafter, on October 29, 2000, petitioner’s

counsel sent a letter to respondent requesting that the notice of

deficiency be rescinded based on respondent’s concession in

docket No. 18517-99S (the case involving the 1998 year).

Petitioner’s counsel imposed a deadline of November 23, 2000, for

respondent to agree to a rescission.    Petitioner’s counsel did

not provide any of the information or documentation that

respondent had previously requested in respondent’s letters dated

April 21, 2000, and June 23, 2000, to petitioner.
                               - 8 -

     On November 21, 2000, petitioner’s counsel sent another

letter to respondent, extending the rescission deadline to

November 28, 2000.   Again, petitioner’s counsel did not provide

any of the information or documentation that respondent had

previously requested in respondent’s letters to petitioner.

Rather, petitioner’s counsel asserted that “you may be subject to

attorney fees and costs by not timely responding to this letter.”

     On December 6, 2000, petitioner commenced the present case

by filing a petition for redetermination.   See sec. 6213(a).

Petitioner placed the entire amount of the deficiency in dispute,

assigning error to each of the adjustments made by respondent in

the notice of deficiency.   Petitioner attached to her petition a

number of documents, all but one of which (monthly telephone

statements) were already in respondent’s possession.

     On March 6, 2001, respondent filed an answer.   In the

answer, respondent denied all of petitioner’s assignments of

error.

     On April 9, 2001, respondent’s paralegal spoke with the

manager of the apartment complex where petitioner resided.    This

conversation was followed by a written request for documentation.

The written request stated, in part, as follows:

          This is to follow up our telephone conversation of
     April 9, 2001, and to request that you forward copies
     of the documents you mentioned pertaining to the rental
     of Apt. #207 * * * . As I recall, you indicated that
     you have a copy of the lease agreement in effect for
     1999 for Apt. 207, and the application papers Ms. Tra
                               - 9 -

     Nguyen [petitioner’s mother] submitted on the first of
     November of each year claiming head of household status
     for Section 8 housing. I understand that HUD - Fairfax
     Co. contributed $482.00 to Ms. Nguyen’s monthly rent
     during 1999 in the amount of $724.00 for the 2 bedroom
     unit, and that Ms. Nguyen’s payment was $242.00 per
     month. I would appreciate receiving copies of
     documentation substantiating HUD’s monthly payment and
     Ms. Nguyen’s monthly rental payment during 1999,
     whether it be copies of canceled checks, rental
     ledgers, or any other form of documentation.

          In addition, if you will, please provide copies of
     Ms. Nguyen’s annual application claiming head of
     household for Section 8 assistance.

     In late April 2001, respondent received documentation from

the apartment complex manager establishing that Mrs. Nguyen,

petitioner, and petitioner’s son resided in a rent-subsidized

apartment and that Mrs. Nguyen received Supplemental Security

Income (SSI).   The documentation also included a statement,

signed by Mrs. Nguyen and petitioner, that identified Mrs. Nguyen

as the head of the household and that showed the amount of Mrs.

Nguyen’s SSI as greater than the amount of petitioner’s income.

     By letter dated May 18, 2001, respondent’s paralegal

proposed to petitioner’s counsel that petitioner concede the case

based on the information obtained from petitioner’s apartment

complex.   However, the paralegal indicated that if petitioner

preferred, the case could be forwarded to respondent’s Appeals

Office.

     On May 24, 2001, petitioner filed a motion for summary

judgment on the ground that respondent “is collaterally estopped
                                - 10 -

from pursuing the same tax deficiency issues in the 1999 tax year

that were decided on the merits for the 1998 tax year.”

     By letter dated May 28, 2001, petitioner’s counsel replied

to respondent’s paralegal’s letter of May 18, 2001.    In his

letter, petitioner’s counsel stated that he was not familiar with

the “interrelationship” of Mrs. Nguyen to petitioner.

     In early June 2001, respondent’s counsel obtained

documentation confirming that petitioner’s son’s medical bills

were paid by Medicaid.   At the same time, respondent’s counsel

also obtained the administrative file for petitioner’s 1998

taxable year.   Included within that file was the original

“Certificate of Enrollment” from the Fairfax County Public

Schools for petitioner’s son.    Upon examining that document,

respondent’s counsel concluded that it had been altered.     Also

included within the administrative file for petitioner’s 1998

taxable year was another “Certificate of Enrollment” for

petitioner’s son but with a different enrollment date.

Respondent’s counsel concluded that the second certificate had

also been altered.

     Respondent’s counsel continued to develop the facts.3

Ultimately, based on her analysis of the administrative files and

information that she gathered from other sources, respondent’s

     3
        In her Declaration, respondent’s counsel states that
“During this time I did not receive any information from
petitioner’s counsel that would assist in the resolution of these
issues.”
                              - 11 -

counsel concluded that governmental agencies and/or Mrs. Nguyen

paid more than one-half of the household expenses and that, as a

consequence, petitioner did not qualify for either head-of-

household filing status or a dependency exemption for her son.

On the other hand, respondent’s counsel concluded that for

purposes of the earned income credit, Hai was the qualifying

child of both Mrs. Nguyen and petitioner.   Because respondent’s

counsel was not able to establish that Mrs. Nguyen received

earned income in 1999, respondent’s counsel concluded that under

the “tie-breaker” rule of section 32(c)(1)(C), petitioner was the

individual who was entitled to the earned income credit.

     By letter to petitioner’s counsel dated June 13, 2001,

respondent’s counsel stated that “this case should be quickly

resolved.”   Respondent’s counsel then unconditionally conceded

the earned income credit issue and proposed that petitioner

concede the filing status, standard deduction, and dependency

exemption issues.

     By letter dated June 19, 2001, petitioner’s counsel accepted

respondent’s concession of the earned income credit issue but was

noncommittal regarding the other issues, stating that “I concur

that this case can be quickly resolved when all of the facts are

determined.”

     On June 26, 2001, respondent filed with the Court a notice

of objection to petitioner’s motion for summary judgment.
                               - 12 -

Respondent filed the objection pursuant to the Court’s Notice of

Filing, which called for the filing of an objection by June 25,

2001.    In the objection, respondent maintained that collateral

estoppel was inapplicable with respect to the substantive issues

in dispute because none of the issues in the prior case were

actually litigated by the parties and decided by the Court.

     By Order dated June 27, 2001, the Court calendared

petitioner’s motion for summary judgment for hearing on August 8,

2001.

     On July 18, 2001, in anticipation of filing a motion for an

award of costs, petitioner executed a Declaration In Support Of

Satisfaction Of The Net Worth Requirements.    In the Declaration,

petitioner stated, in part, that “I fully participated in an

appeals office conference while the case was in a docketed

status.”4

     On August 3, 2001, the parties filed a Stipulation of Agreed

Adjustments.    In the stipulation, petitioner conceded the filing

status, standard deduction, and dependency exemption issues, and

respondent conceded the earned income credit issue.    On the same

day, petitioner filed a motion to withdraw petitioner’s motion


     4
        Respondent contends that petitioner never participated in
an Appeals Office conference. We note that there is nothing in
the record to support petitioner’s statement; we note further
that in petitioner’s Reply, filed Jan. 14, 2002, see infra,
petitioner appears to admit that no Appeals Office conference
ever occurred.
                              - 13 -

for summary judgment.   In the motion to withdraw, petitioner

stated that she intended to file a motion for an award of costs

within 30 days.

     In an Order dated August 7, 2001, the Court stated that

petitioner’s motion for summary judgment lacked merit;

nevertheless, the Court granted petitioner’s motion to withdraw

inasmuch as respondent did not oppose such action.

     On September 26, 2001, petitioner filed her motion for an

award of costs.   On November 28, 2001, respondent filed a

response, together with a supporting memorandum and Declaration,

objecting to the granting of petitioner’s motion.    Thereafter, on

January 14, 2002, petitioner filed a reply, and on January 22,

2002, respondent filed a response.

Discussion

     We apply section 7430 as amended by Congress in the Internal

Revenue Service Restructuring and Reform Act of 1998 (RRA 1998),

Pub. L. 105-206, sec. 3101, 112 Stat. 685, 727.5

     A.   Requirements For a Judgment Under Section 7430

     Under section 7430(a), a judgment for litigation costs

incurred in connection with a court proceeding may be awarded

only if a taxpayer: (1) Is the prevailing party; (2) has

exhausted his or her administrative remedies within the IRS; and

     5
        Sec. 7430 was amended most recently by Congress in the
Community Renewal Tax Relief Act of 2000 (CRTRA), Pub. L. 106-
554, sec. 319(25), 114 Stat. 2763A-587, 2763A-647. The
amendment, which is effective on the date of enactment of CRTRA
(Dec. 21, 2000), affects only sec. 7430(c)(3) and is purely
clerical in nature.
                               - 14 -

(3) did not unreasonably protract the court proceeding.      Sec.

7430(a) and (b)(1), (3).    Similarly, a judgment for

administrative costs incurred in connection with an

administrative proceeding may be awarded under section 7430(a)

only if a taxpayer: (1) Is the prevailing party; and (2) did not

unreasonably protract the administrative proceeding.    Sec.

7430(a) and (b)(3).

       A taxpayer must satisfy each of the respective requirements

in order to be entitled to an award of litigation or

administrative costs under section 7430.    Rule 232(e).    Upon

satisfaction of these requirements, a taxpayer may be entitled to

reasonable costs incurred in connection with the administrative

or court proceeding.    See sec. 7430(a)(1) and (2), (c)(1) and

(2).

       To be a “prevailing party”, the taxpayer must: (1)

Substantially prevail with respect to either the amount in

controversy or the most significant issue or set of issues

presented; and (2) satisfy the applicable net worth requirement.

Sec. 7430(c)(4)(A).    Respondent concedes that petitioner has

satisfied the requirements of section 7430(c)(4)(A).    Petitioner

will nevertheless fail to qualify as the prevailing party if

respondent can establish that respondent’s position in the court

and administrative proceedings was substantially justified.        Sec.

7430(c)(4)(B)(i).
                                - 15 -

     B.   Substantial Justification

     The Commissioner's position is substantially justified if,

based on all of the facts and circumstances and the legal

precedents relating to the case, the Commissioner acted

reasonably.    Pierce v. Underwood, 487 U.S. 552 (1988); Sher v.

Commissioner, 89 T.C. 79, 84 (1987), affd. 861 F.2d 131 (5th Cir.

1988).    In other words, to be substantially justified, the

Commissioner's position must have a reasonable basis in both law

and fact.    Pierce v. Underwood, supra; Rickel v. Commissioner,

900 F.2d 655, 665 (3d Cir. 1990), affg. in part and revg. in part

on other grounds 92 T.C. 510 (1989).     A position is substantially

justified if the position is "justified to a degree that could

satisfy a reasonable person".    Pierce v. Underwood, supra at 565

(construing similar language in the Equal Access to Justice Act).

Thus, the Commissioner's position may be incorrect but

nevertheless be substantially justified "'if a reasonable person

could think it correct'".    Maggie Mgmt. Co. v. Commissioner, 108

T.C. 430, 443 (1997) (quoting Pierce v. Underwood, supra at 566

n.2).

     The relevant inquiry is "whether * * * [the Commissioner]

knew or should have known that * * * [his] position was invalid

at the onset".    Nalle v. Commissioner, 55 F.3d 189, 191 (5th Cir.

1995), affg. T.C. Memo. 1994-182.     We look to whether the

Commissioner's position was reasonable given the available facts
                                - 16 -

and circumstances at the time that the Commissioner took his

position.     Maggie Mgmt. Co. v. Commissioner, supra at 443;

DeVenney v. Commissioner, 85 T.C. 927, 930 (1985).

     The fact that the Commissioner eventually concedes, or even

loses, a case does not establish that his position was

unreasonable.     Estate of Perry v. Commissioner, 931 F.2d 1044,

1046 (5th Cir. 1991); Sokol v. Commissioner, 92 T.C. 760, 767

(1989).     However, the Commissioner's concession does remain a

factor to be considered.     Powers v. Commissioner, 100 T.C. 457,

471 (1993), affd. in part, revd. in part and remanded on another

issue 43 F.3d 172 (5th Cir. 1995).

     As relevant herein, the position of the United States that

must be examined against the substantial justification standard

with respect to the recovery of administrative costs is the

position taken by the Commissioner as of the date of the notice

of deficiency.     Sec. 7430(c)(7)(B)(ii).   The position of the

United States that must be examined against the substantial

justification standard with respect to the recovery of litigation

costs is the position taken by the Commissioner in the answer to

the petition.     Bertolino v. Commissioner, 930 F.2d 759, 761 (9th

Cir. 1991), affg. an unpublished decision of this Court; Sher v.

Commissioner, supra at 134-135; see sec. 7430(c)(7)(A).

Ordinarily, we consider the reasonableness of each of these

positions separately in order to allow the Commissioner to change
                               - 17 -

his position.    Maggie Mgmt. Co. v. Commissioner, supra at 442

(citing Huffman v. Commissioner, 978 F.2d 1139, 1144-1147 (9th

Cir. 1992), affg. in part and revg. in part on another ground

T.C. Memo. 1991-144).   In the present case, however, we need not

follow this approach because respondent’s position was

essentially the same in the administrative and litigation

proceedings.    See Maggie Mgmt. Co. v. Commissioner, supra at 442.

More specifically, respondent’s position was that petitioner had

failed to substantiate her entitlement to head of household

filing status (and the standard deduction for that filing status)

and a dependency exemption deduction and earned income credit in

respect of her son.

     Deductions and credits are matters of legislative grace.

New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934);

Segel v. Commissioner, 89 T.C. 816, 842 (1987).   The same may be

said of a tax-favored filing status such as head of household.

See D’Anjou v. Commissioner, T.C. Memo. 1992-138.   Taxpayers are

required to substantiate the deductions and credits that they

claim by maintaining records necessary to establish both the

taxpayers’ entitlement to such items and the proper amount

thereof.   Sec. 6001; Meneguzzo v. Commissioner, 43 T.C. 824, 831-

832 (1965); sec. 1.6001-1(a), Income Tax Regs.; see Rule 142(a);

INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); Welch v.

Helvering, 290 U.S. 111, 115 (1933); Segel v. Commissioner,
                              - 18 -

supra; Hradesky v. Commissioner, 65 T.C. 87, 90 (1975), affd. per

curiam 540 F.2d 821 (5th Cir. 1976); see also sec. 7491(a)(2)(A)

and (B).   A taxpayer’s self-serving declaration is no ironclad

substitute for the records that the law requires.    See Weiss v.

Commissioner, T.C. Memo. 1999-17; see also Seaboard Commercial

Corp. v. Commissioner, 28 T.C. 1034, 1051 (1957) (a taxpayer's

income tax return is a self-serving declaration that may not be

accepted as proof for the deduction or exclusion claimed by the

taxpayer); Halle v. Commissioner, 7 T.C. 245, 247 (1946) (a

taxpayer’s return is not self-proving as to the truth of its

contents), affd. 175 F.2d 500 (2d Cir. 1949).

     Factual determinations are required in order to decide

whether a taxpayer is entitled to: (1) Head-of-household filing

status, see sec. 2(b); (2) a dependency exemption deduction, see

secs. 151 and 152; or (3) an earned income credit, see sec. 32.

We have held that whenever the resolution of adjustments requires

factual determinations, the Commissioner is not obliged to

concede those adjustments until the Commissioner has received,

and has had a reasonable period of time to verify, adequate

substantiation for the matters in question.     Gealer v.

Commissioner, T.C. Memo. 2001-180, and cases cited therein;

O’Bryon v. Commissioner, T.C. Memo. 2000-379, (and cases cited

therein); Cooper v. Commissioner, T.C. Memo. 1999-6.
                                - 19 -

     In the present case, respondent never received adequate

substantiation regarding petitioner’s claimed filing status and

dependency exemption deduction, and petitioner ultimately

conceded those issues.     In contrast, by June 2001, respondent

received adequate substantiation regarding petitioner’s claimed

earned income credit, and respondent immediately conceded that

issue unconditionally.

     Petitioner contends that it was unreasonable for respondent

to require adequate substantiation for the adjustments in issue

because respondent was collaterally estopped from even making

those adjustments.6   In this regard, petitioner points to the

decision in petitioner’s favor that was entered in docket No.

18517-99S regarding the taxable year 1998.     However, petitioner’s

argument ignores the fact that none of the issues in the prior

case was actually litigated by the parties and decided by the

Court.   See Peck v. Commissioner, 90 T.C. 162, 166-167 (1988),

affd. 904 F.2d 525 (9th Cir. 1990), discussing the requirements

for collateral estoppel.    Rather, in the case at docket No.

18517-99S, the Court merely entered decision pursuant to the

stipulation of the parties.    In this regard, what we said many

years ago in Hart Metal Prods. Corp. v. Commissioner, T.C. Memo.

1969-164, affd. 437 F.2d 946 (7th Cir. 1971) is apropos:


     6
        We note that petitioner’s contention appears to be
inconsistent with her concession in the present case of the
issues related to filing status, standard deduction, and the
dependency exemption deduction.
                                - 20 -

     It is well settled that a judgment is conclusive in an
     action only as to matters actually litigated and
     determined in the prior action and that where a
     decision of this Court constitutes only a pro forma
     acceptance of an agreement between the parties to
     settle their controversy for reasons undisclosed, there
     has been no such determination as is required for the
     application of the doctrine of collateral estoppel.
     United States v. International Bldg. Co., 345 U.S. 503.
     In the prior case no trial or argument was had and no
     stipulations of facts or briefs were filed. Our
     decision of no deficiency was entered pro forma upon
     the basis of an agreement of the parties to settle the
     case for reasons undisclosed. Accordingly, the doctrine
     of collateral estoppel has no application here.

     Petitioner also contends that it was unreasonable for

respondent to require adequate substantiation for the adjustments

in issue because (so petitioner alleges) such substantiation was

already in respondent’s files for petitioner’s 1998 taxable year.

However, petitioner’s argument ignores the fact that “each

taxable year stands on its own and must be separately

considered.”     Pekar v. Commissioner, 113 T.C. 158, 166 (1999);

see Rinehart v. Commissioner, T.C. Memo. 2002-9; see also Auto.

Club of Mich. v. Commissioner, 353 U.S. 180, 183-184 (1957).     In

other words, each taxable year stands on the facts existing in

that year, and, as experience teaches, the facts may change from

year to year.7


     7
        Petitioner cites Nguyen v. Commissioner, T.C. Memo. 2001-
41, for the proposition that the Commissioner is not
substantially justified when he fails to examine information
already in his possession. Petitioner’s reliance on the Nguyen
case is misplaced, however. In that case, the Commissioner had
obtained documentation for the year in issue from the taxpayer.
Having solicited that documentation, we held that it was
                                                   (continued...)
                                - 21 -

         Petitioner also contends that it was unreasonable for

respondent not to sever the filing status and dependency

exemption issues from the earned income credit issue and allow

petitioner an earned income credit irrespective of having a

“qualifying child”.     See sec. 32(c)(1)(A)(ii).    Yet petitioner

also tells us (in arguing that an award of costs of $15,222 is

reasonable) that the three issues are “interrelated”.       In any

event, petitioner’s contention again ignores the fact that the

allowance of an earned income credit, whether or not based on a

“qualifying child”, requires factual determinations.

     In view of the foregoing, we hold that respondent’s position

in the administrative and court proceedings was substantially

justified.     In so holding, we have considered other arguments

made by petitioner for a contrary result and found those

arguments to be without merit.

     C.     Remaining Requirements of Section 7430

     Because respondent’s position in the administrative and

court proceedings was substantially justified, we need not decide

whether petitioner exhausted her administrative remedies, whether

petitioner unreasonably protracted the proceedings, or whether


     7
      (...continued)
unreasonable for respondent not to evaluate it before issuing a
notice of deficiency. In any event, in the present case,
respondent actually evaluated information for the year in issue
obtained from the taxpayer, found it wanting, solicited
additional information, and only then, after petitioner was not
forthcoming with such additional information, issued the notice
of deficiency.
                             - 22 -

the administrative and litigation costs claimed by petitioner are

reasonable.

     D.   Conclusion

     In conclusion, we hold that petitioner is not entitled to an

award of administrative and litigation costs.

     In order to reflect the foregoing,



                                          An appropriate order and

                                   decision under Rule 155 will

                                   be entered.
