                       T.C. Memo. 2002-157



                     UNITED STATES TAX COURT



                 JOSE A. SALAZAR, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11128-01.                   Filed June 20, 2002.


     Alfonso Soto, for petitioner.

     Roberta L. Shumway and Kerry H. Bryan, for respondent.


                       MEMORANDUM OPINION


     ARMEN, Special Trial Judge:     Petitioner filed with the Court

a petition for administrative costs pursuant to section

7430(f)(2) and Rules 270 through 274.1    In the petition,

petitioner seeks to recover administrative costs in respect of



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

the taxable years 1984 and 1985.

     This case is presently before the Court on respondent’s

motion for judgment on the pleadings, filed pursuant to Rule 120.

Because we have considered matters outside of the pleadings, we

shall treat respondent’s motion as one for summary judgment

pursuant to Rule 121.   See Rule 120(b).

     As discussed in detail below, we hold that there is no

dispute as to any material fact, and we shall enter decision for

respondent.   However, under the circumstances presented, we shall

enter decision on the narrow ground that petitioner filed his

claim for administrative costs with respondent before respondent

mailed to petitioner a final decision regarding petitioner’s tax

liabilities for 1984 and 1985.    See sec. 7430(b)(4).

Background

     In 1985, respondent issued a notice of deficiency to

petitioner determining deficiencies in, and additions to, his

income taxes for 1982 and 1983.    Thereafter, in March 1988,

respondent issued a notice of deficiency to petitioner

determining deficiencies in, and additions to, his Federal income

taxes for 1984 and 1985.

     Petitioner filed with the Court a petition for

redetermination in respect of the notice of deficiency for 1982

and 1983, which petition was assigned docket No. 43255-85.      See

sec. 6213(a).   In contrast, petitioner did not file with the
                               - 3 -

Court any petition for redetermination in respect of the notice

of deficiency for 1984 and 1985.

     In October 1988, the Court entered a stipulated decision in

docket No. 43255-85 pursuant to the parties’ agreement.    The

decision reflects petitioner’s liability for deficiencies in

income taxes and additions to tax for 1982 and 1983.

     Over the next several years, petitioner attempted to resolve

his tax liabilities for 1984 and 1985.   During this period,

petitioner also requested that respondent abate penalties and

interest for 1982, 1983, 1984, and 1985.

     By letter dated March 19, 1998, respondent advised

petitioner that because of the Court’s decision in docket No.

43255-85, respondent would not abate penalties or interest for

1982 or 1983.   However, respondent advised petitioner that

respondent would abate: (1) Assessments of penalties and interest

for 1984 (resulting in a credit balance for that year of

$5,451.13); and (2) assessments of tax, penalties, and interest

for 1985 (resulting in a credit balance for that year of

$6,378.08).

     On September 13, 2000, respondent issued to petitioner a

notice of final determination under section 6404 disallowing his

claim for abatement of interest for 1982 and 1983.   Petitioner

then filed with the Court a timely petition for review, assigned
                                - 4 -

docket No. 12440-00, challenging respondent’s determination.2

     On December 8, 2000, petitioner filed with respondent an

application for administrative costs for 1982, 1983, 1984, and

1985 under section 7430.   On December 15, 2000, respondent wrote

to petitioner informing him that his application for

administrative costs for 1982 and 1983 was premature in light of

his then-pending petition for review of his interest abatement

claim in docket No. 12440-00.   Respondent did not otherwise

respond to petitioner’s request for reimbursement of

administrative costs for 1984 and 1985.

     On March 19, 2001, petitioner filed with the Court a

petition for administrative costs, which was assigned docket No.

3806-01, seeking a recovery for 1984 and 1985.   On October 23,

2001, the Court entered an order of dismissal for lack of

jurisdiction in docket No. 3806-01 on the ground that the

petition was not filed with respect to a decision of the Internal

Revenue Service granting or denying an application for reasonable

administrative costs pursuant to section 7430(f)(2),3 nor had the


     2
        On Oct. 22, 2001, the Court entered a stipulated decision
in docket No. 12440-00 in which the parties agreed that
petitioner was entitled to partial abatements of interest for
1982 and 1983 resulting in overpayments of interest of $1,785 and
$2,561, for 1982 and 1983, respectively.
     3
        Sec. 7430(f)(2) provides that a taxpayer may file a
petition for review with the Court challenging a decision of the
Internal Revenue Service granting or denying (in whole or in
part) an award for reasonable administrative costs. Generally,
                                                   (continued...)
                               - 5 -

6-month period set forth in section 301.7430-2(c)(6), Proced. &

Admin. Regs.,4 expired as of March 19, 2001--the date that the

petition was filed.

     In the meantime, on September 6, 2001, petitioner filed with

the Court a second petition for administrative costs, which

petition initiated the instant case, again seeking a recovery in

respect of the taxable years 1984 and 1985.   Paragraph 4(b) of

the petition states: “On March 19, 1998, Respondent admitted to

the erroneous assessments and refunded excess taxes, and abated

penalties and interest thereon, showing that Petitioner

substantially prevailed as to the amount in controversy and the

most significant issues.”

     In response to the petition, respondent filed a motion for

judgment on the pleadings.   Respondent asserts that, insofar as

petitioner contends that respondent’s letter dated March 19,



     3
      (...continued)
such a petition must be filed with the Court no later than 90
days after the date that the Internal Revenue Service mails its
notice of decision regarding a request for administrative costs.
     4
        Sec. 301.7430-2(c)(6), Proced. & Admin. Regs., provides
in pertinent part:

     If the Internal Revenue Service does not respond on the
     merits to a request by the taxpayer for an award of
     reasonable administrative costs filed under paragraph
     (c)(1) of this section within 6 months after such
     request is filed, the Internal Revenue Service’s
     failure to respond may be considered by the taxpayer as
     a decision of the Internal Revenue Service denying an
     award for reasonable administrative costs.
                               - 6 -

1998, constituted a final decision of the Internal Revenue

Service for the years 1984 and 1985 within the meaning of section

7430(b)(4), respondent is entitled to judgment on the ground that

petitioner failed to file his application for reasonable

administrative costs within 90 days of March 19, 1998, as

required by section 7430(b)(4).   Petitioner filed an objection to

respondent’s motion in which he argued that his application for

reasonable administrative costs was timely filed with respondent

within 90 days of respondent’s final determination dated

September 13, 2000, that was issued pursuant to section 6404.

     This matter was called for hearing at the Court’s motions

session in Washington, D.C.   Counsel for both parties appeared at

the hearing and offered oral argument.

     During the hearing, counsel for respondent informed the

Court that respondent was seeking judgment on the pleadings on

the narrow ground that, insofar as the petition appeared to

allege that respondent’s March 19, 1998, letter was a final

decision within the meaning of section 7430(b)(4), petitioner is

not entitled to an award of reasonable administrative costs

because he failed to file his application therefor with

respondent within the 90-day period prescribed in section

7430(b)(4).   However, counsel for respondent also informed the

Court that respondent considered it “debatable” whether his

letter dated March 19, 1998, could be characterized as a final
                                - 7 -

decision within the meaning of section 7430(b)(4) inasmuch as

respondent maintained that petitioner’s case involved a

collection matter ineligible for an award of reasonable

administrative costs.    See sec. 301.7430-3(a) and (b), Proced. &

Admin. Regs.5

     During the hearing, counsel for petitioner stated that he

was uncertain whether respondent had issued a final decision

(within the meaning of section 7430(b)(4)) to petitioner for 1984

and 1985, and that the reference to respondent’s March 19, 1998,

letter was included in the petition because such letter was the

only communication that petitioner received from respondent that

arguably constituted a final decision.

Discussion

     1.   Jurisdiction

     The Court’s jurisdiction under section 7430 normally is

dependent upon the filing of a petition within 90 days after the

Commissioner issues a decision granting or denying (in whole or

in part) a taxpayer’s application for an award of reasonable

administrative costs.    Sec. 7430(f)(2).   However, where the

Commissioner fails to issue a decision within 6 months of the

filing of such an application, a taxpayer may file a petition



     5
        We note that respondent’s motion to dismiss for lack of
jurisdiction filed in docket No. 3806-01 includes an allegation
that respondent’s letter dated Mar. 19, 1998, does not constitute
a final decision within the meaning of sec. 7430(b)(4).
                                - 8 -

 with the Court within the 90-day period following the expiration

of such 6-month period.   Sec. 301.7430-2(c)(6), Proced. & Admin.

Regs.

     Petitioner filed his application for an award of reasonable

administrative costs with respondent on December 8, 2000.     The 6-

month period referred to in section 301.7430-2(c)(6), Proced. &

Admin. Regs., expired with respect to petitioner’s application on

June 8, 2001.   In light of respondent’s failure to issue a

decision regarding petitioner’s application, petitioner filed

with the Court a timely petition on September 6, 2001.   Under the

circumstances, there is no dispute between the parties regarding

the Court’s jurisdiction with regard to this matter.

     2.   Petitioner’s Claim for Administrative Costs

     Section 7430(b)(4) provides:

           (b) Limitations.--

             (4) Period For Applying To IRS For
           Administrative Costs.–-An award may be made under
           subsection (b) by the Internal Revenue Service for
           reasonable administrative costs only if the
           prevailing party files an application with the
           Internal Revenue Service for such costs before the
           91st day after the date on which the final
           decision of the Internal Revenue Service as to the
           determination of the tax, interest, or penalty is
           mailed to such party.

     Section 301.7430-2(c), Proced. & Admin. Regs., provides in

pertinent part:

          (5) Period for requesting costs from the Internal
     Revenue Service. To recover reasonable administrative
     costs pursuant to section 7430 and this section, the
                                 - 9 -

     taxpayer must file a request for costs no later than 90
     days after the date the final decision of the Internal
     Revenue Service with respect to all tax, additions to
     tax and penalties at issue in the administrative
     proceeding is mailed, or otherwise furnished, to the
     taxpayer. The final decision of the Internal Revenue
     Service for purposes of this section is the document
     which resolves the tax liability of the taxpayer with
     regard to all tax, additions to tax and penalties at
     issue in the administrative proceeding (such as a Form
     870 or closing agreement), or a notice of assessment
     for that liability (such as the notice and demand under
     section 6303), whichever is earlier mailed, or
     otherwise furnished, to the taxpayer. * * * [Emphasis
     added.]

     In sum, the Commissioner is not obliged to grant an award of

reasonable administrative costs unless the taxpayer files a

request for such costs no later than 90 days after the date that

the Commissioner mails a final decision regarding the tax,

additions to tax, and penalties to the taxpayer.

     Our review of the record in this case leads us to conclude

that respondent did not issue a final decision to petitioner for

1984 and 1985 within the meaning of section 7430(b)(4).

Respondent’s letter dated March 19, 1998, arguably possesses some

of the characteristics of a final decision in that it contains a

clear explanation of respondent’s computation of petitioner’s tax

liabilities for 1984 and 1985.    On the other hand, we are not

convinced that respondent intended that letter to be considered a

final decision.   In addition, the letter is not the equivalent of

a Form 870 or formal closing agreement, and it cannot be

considered final in the technical sense of the term.
                                - 10 -

     We likewise reject the suggestion made in petitioner’s

objection to respondent’s motion that the notice of final

determination issued to petitioner on September 13, 2000,

constitutes a final decision within the meaning of section

7430(b)(4).   In short, respondent’s final determination pursuant

to section 6404 is responsive only to petitioner’s claim for

abatement of interest for 1982 and 1983.    The notice of final

determination simply does not pertain to petitioner’s request for

an award of reasonable litigation costs for 1984 and 1985.

     The parties agree that respondent has not issued any other

document to petitioner that might constitute a final decision

within the meaning of section 7430(b)(4).    Consistent with the

preceding discussion, we shall grant respondent’s motion for

summary judgment in that we shall enter a decision that

petitioner is not entitled to an award of reasonable

administrative costs for 1984 and 1985 on the narrow ground that

petitioner filed his claim for administrative costs with

respondent before respondent mailed to petitioner a final

decision regarding petitioner’s tax liabilities for 1984 and

1985.6   See sec. 7430(b)(4).



     6
        By granting respondent’s motion on such narrow ground we
leave open the possibility that respondent may yet issue a final
decision for 1984 and 1985 that would then permit petitioner to
file an application for administrative costs.
                        - 11 -

In order to reflect the foregoing,



                              An appropriate order and

                         decision will be entered.
