                   T.C. Memo. 2007-293



                 UNITED STATES TAX COURT



ESTATE OF CHARLES A. LIPPITZ, DECEASED, MICHAEL LIPPITZ,
   ADMINISTRATOR AND RHITA S. LIPPITZ, Petitioners v.
      COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket Nos.   35775-84, 45694-85,   Filed September 25, 2007.
              360-87,   37518-87,
              32365-88, 27448-89.



     P-Wife moved to amend the petitions to assert a
claim for innocent spouse relief under sec. 6015(c) and
(f), I.R.C. Subsequently, P-Wife moved for summary
judgment, and R conceded. P-Wife now seeks litigation
costs under sec. 7430, I.R.C., on the basis that she
was the prevailing party and R’s position was not
substantially justified and because she submitted a
qualified offer to R and P-Wife’s liability was
determined to be less than if R had accepted her offer.

     Held: While P-Wife was the prevailing party, R
was substantially justified in opposing P-Wife’s motion
to amend the petitions to assert a claim for innocent
spouse relief.

     Held, further, R was not substantially justified
in continuing to oppose P-Wife’s claim for relief after
                               - 2 -

     receiving a recommendation that P-Wife be granted
     relief from R’s office that specializes in sec. 6015,
     I.R.C., cases.

          Held, further, P-Wife submitted a qualified offer
     under sec. 7430(c)(4)(E) and (g), I.R.C., during the
     qualified offer period, and P-Wife’s liability was
     determined to be less than if R had accepted the
     qualified offer.

          Held, further, R’s concession was not a settlement
     for purposes of sec. 7430(c)(4)(E)(ii), I.R.C.



     Karen L. Hawkins, for petitioner Rhita S. Lippitz.

     Paul E. Shick, for the Estate of Charles Lippitz.

     James M. Klein, for respondent.



                        MEMORANDUM OPINION


     GOEKE, Judge:   This matter is currently before the Court on

petitioner Rhita Lippitz’s motion for the recovery of litigation

costs.   In relevant part petitioner1 alleged, and respondent

ultimately conceded, that she is entitled to relief under section

6015(c)2 from any additional joint liability determined for her

and her late husband Charles Lippitz for taxable years 1980

through 1985.   Petitioner moves for the recovery of litigation



     1
      For convenience, references to petitioner in the singular
are to Rhita Lippitz.
     2
      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.
                                 - 3 -

costs under section 7430 on the grounds that she is the

prevailing party and because the judgment in this matter is less

than the liability would have been had respondent accepted

petitioner’s qualified offer.3    Because we find that respondent

was substantially justified initially in opposing petitioner’s

claim for innocent spouse relief, we rule in part for respondent.

However, because it took too long for respondent to concede the

issue and because petitioner’s liability pursuant to this Court’s

judgment was less than her qualified offer and respondent’s

concession was not a settlement, we also rule in part for

petitioner.

                            Background

     These cases involve taxable years 1980 through 1985 and

relate to deficiencies determined by respondent that petitioner

and her late husband, Charles Lippitz, assigned income taxable to

them to various trusts formed by Mr. Lippitz while he was a

practicing attorney.   A separate petition was filed for each tax

year.4   Petitioners resided in Evanston, Illinois, at the time

the petitions were filed.   The cases were ultimately consolidated



     3
      The parties agree no hearing on petitioner’s motion is
necessary.
     4
       Docket No. 35775-84 relates   to tax year 1980; docket No.
45694-85 relates to tax year 1981;   docket No. 360-87 relates to
tax year 1982; docket No. 37518-87   relates to tax year 1983;
docket No. 32365-88 relates to tax   year 1984; and docket No.
27448-89 relates to tax year 1985.
                               - 4 -

on July 22, 2003.   For all but taxable year 1985, these cases

were calendared for trial on February 12, 1990.   The cases were

then continued.   Petitioners’ case for taxable year 1985 was

first set for trial on December 5, 1994.

     Mr. Lippitz and respondent reached an “Agreement For

Resolving Remaining Issues” in April 2003.   According to

respondent, the only items that remained after this agreement was

signed were computations, and then completion of a final

stipulation of settled issues and decision documents.   The

stipulation of settled issues and decision documents were not,

however, filed with the Court until November 1, 2006.

     It was sometime in 2003 when petitioner alleges she first

became aware that respondent had asserted deficiencies in tax

against her and Mr. Lippitz for tax years 1980 through 1985, and

that petitions on her behalf had been filed relating to the 1980

through 1985 tax years.   According to petitioner, prior to 2003,

the petitions filed on her behalf had been handled entirely by

Mr. Lippitz, and at various points as many as 10 different

lawyers who had entered appearances for petitioner.

     After Mr. Lippitz passed away in July 2004, petitioner hired

Karen Hawkins to represent her in September 2004.   Ms. Hawkins

entered her appearance as counsel for petitioner in November

2004.   On January 14, 2005, petitioner filed a motion to amend

the petitions to assert a claim for relief under section 6015(c)
                               - 5 -

and (f).   Respondent opposed petitioner’s motion on grounds that

all issues had been settled in April 2003 and that it was too

late to assert such a claim.

     On July 1, 2005, petitioner sent to respondent a separate

letter for each of the docketed cases indicating that she was

making a qualified settlement offer pursuant to section

7430(c)(4)(E) and (g).   Petitioner offered to settle each case

for relief from any additional joint liability under section

6015(c).   In addition, petitioner offered to make a payment of

$100 against any additional joint liability determined by

respondent for each of the tax years at issue.   Respondent did

not respond to these offers.

     On August 4, 2005, the Court granted petitioner’s motion for

leave to amend, and petitioner’s amended petitions were filed in

each docketed case.   Respondent forwarded petitioner’s file to

the Internal Revenue Service Cincinnati Centralized Innocent

Spouse Operation (CCISO) for evaluation of her claim.   Petitioner

submitted a completed questionnaire to CCISO, and on November 10,

2005, CCISO determined that petitioner was entitled to complete

relief from any deficiencies asserted in the docketed cases.     On

December 5, 2005, respondent filed his answer denying

petitioner’s claim for relief under section 6015.

     CCISO’s determination letter was eventually disclosed to

petitioner on April 3, 2006.   On May 2, 2006, petitioner sent
                               - 6 -

respondent another settlement offer, this time offering to settle

for full relief under section 6015(c) from any additional joint

liability.   In the same letter petitioner indicated to respondent

that she intended to file a motion for summary judgment if

respondent did not agree to the settlement.   Respondent did not

agree to the settlement, and on May 24, 2006, petitioner filed a

motion for summary judgment.

     On July 14, 2006, respondent moved for additional time to

respond to petitioner’s motion and indicated an intention to

concede petitioner’s entitlement to the relief recommended from

CCISO.   Respondent sought additional time in order to pursue a

stipulation of settled issues reflective of his concession.    At

this point, petitioner refused to enter into a stipulation of

settled issues.   In a subsequent filing related to respondent’s

motion to extend time, respondent indicated to the Court that he

in fact conceded the innocent spouse issue.

     On September 21, 2006, this Court determined that

petitioner’s motion for summary judgment was moot because

respondent conceded.   Petitioner now moves for the recovery of

litigation costs.   Petitioner argues that for the period of July

28, 2004, to the present, she is entitled to an award of

litigation fees because she is the prevailing party and

respondent was not substantially justified.   For the period July

2, 2005, to the present, petitioner argues that she is entitled
                               - 7 -

to litigation fees because she is the prevailing party within the

meaning of section 7430(c)(4)(E)(i), because the judgment is less

than her qualified offer.

                            Discussion

A.   Prevailing Party Generally

     Section 7430(a) authorizes the award of reasonable

litigation costs paid or incurred in a 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 the Internal Revenue Code.    The taxpayer must

establish that she:   (1) Is the prevailing party; (2) has

exhausted the available administrative remedies; (3) has not

unreasonably protracted the court proceedings; and (4) has

claimed litigation costs that are reasonable.    Sec. 7430(a) and

(b)(1), (3).   The taxpayer bears the burden of proving that these

requirements are met.   Rule 232(e).   A taxpayer is generally the

prevailing party if the taxpayer substantially prevailed with

respect to either the amount in controversy or the most

significant issue or set of issues.    Sec. 7430(c)(4)(A).   Under

section 7430(c)(4)(B), even if the taxpayer meets the

requirements of a prevailing party under section 7430(c)(4)(A),

the taxpayer will not be treated as a prevailing party if the

Commissioner’s position in the proceeding was substantially

justified.
                                - 8 -

     In general, 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’s position

was reasonable given the available facts and circumstances at the

time that the Commissioner took his position, as well as any

applicable legal precedents.    Id. at 443; DeVenney v.

Commissioner, 85 T.C. 927, 930 (1985).    The fact that the

Commissioner eventually concedes or loses a case does not
                               - 9 -

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 is 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).

     Respondent argues that petitioner should not be treated as

the prevailing party because respondent’s position was

substantially justified.   The first opportunity respondent had to

take a position with respect to petitioner’s claim for innocent

spouse relief was in response to petitioner’s motion to amend the

petitions.   Respondent opposed petitioner’s motion on the grounds

that the matter had been litigated for almost 20 years and that

all the issues in the matter had been resolved by agreement of

the parties in April 2003.   Respondent argued that petitioner

should be bound by that agreement.     After we allowed petitioner

the opportunity to amend her petitions to assert innocent spouse

relief, respondent denied petitioner’s new allegations.5

     We find respondent’s initial position with respect to

petitioner’s claim for innocent spouse relief in opposing the

motion to amend to have been substantially justified.     Reason


     5
      Respondent denied petitioner’s new factual allegations for
lack of information and denied petitioner’s legal conclusions
generally.
                                - 10 -

suggests that it would have been difficult for Mr. Lippitz to

litigate a joint personal tax liability for nearly 20 years and

not, at some point, have alerted petitioner to the fact that such

a litigation was ongoing.    Moreover, after learning of the

outstanding litigation, petitioner took at least a year to seek

leave to amend her petitions.    Finally, respondent believed he

had resolved all of the issues in the matter by an agreement

reached in April of 2003.6   Thus, we find respondent’s position

opposing petitioner’s motion to amend to have been reasonable.

     While respondent’s position was reasonable at the start, it

does not necessarily follow that respondent’s position continued

to be reasonable, especially when additional facts came to light.

On November 10, 2005, CCISO issued a determination letter

recommending that petitioner be granted innocent spouse relief.

Despite CCISO’s determination, respondent persisted in his denial

of petitioner’s claim and filed his answer to this effect.

Respondent does not point to any substance, such as an error in

CCISO’s determination or other legal or factual basis, upon which

he maintained his denial of relief.      Pierce v. Underwood, supra

at 565.   Instead, respondent simply maintains that he needed to

develop more fully the facts related to petitioner’s claim.


     6
      We note that while petitioner denied being bound by the
April 2003 agreement, she did not deny her knowledge of the
litigation or the agreement at the time it was reached. Instead
petitioner has averred, vaguely, that she did not learn of the
litigation until “sometime in 2003”.
                              - 11 -

Respondent was free to do so; however in the absence of any legal

or factual basis to make his position reasonable, he did so at

his peril.   We find that respondent was not substantially

justified in denying petitioner’s claim for relief after

receiving CCISO’s recommendation for relief and filing his answer

to petitioner’s amended petitions.

B.   Qualified Offer

     Under section 7430(c)(4)(E) a party shall also be treated as

the prevailing party if “the liability of the taxpayer pursuant

to the judgment in the proceeding (determined without regard to

interest) is equal to or less than the liability of the taxpayer

which would have been so determined if the United States had

accepted a qualified offer of the party under subsection (g).”

The qualified offer provision of section 7430(c)(4)(E) applies

without regard to whether respondent’s position in the matter is

substantially justified.7   See Haas & Associates Accountancy

Corp. v. Commissioner, 117 T.C. 48, 59 (2001), affd. 55 Fed.

Appx. 476 (9th Cir. 2003); McGowan v. Commissioner, T.C. Memo.

2005-80.



     7
      Sec. 7430(c)(4)(E)(iv) provides that the qualified offer
subparagraph “shall not apply to a party which is a prevailing
party under any other provision of this paragraph.” For the
period prior to respondent’s answer to the amended petitions,
petitioner was not a prevailing party with respect to any of the
docketed cases. Thus, it is necessary to determine whether
petitioner was a prevailing party based on having submitted a
qualified offer during the period prior to respondent’s answer.
                              - 12 -

     A qualified offer is defined in section 7430(g)(1) as a

written offer which:

          (A) is made by the taxpayer to the United States
     during the qualified offer period;

          (B) specifies the offered amount of the taxpayer’s
     liability (determined without regard to interest);

          (C) is designated at the time it is made as a
     qualified offer for purposes of this section; and

          (D) remains open during the period beginning on
     the date it is made and ending on the earliest of the
     date the offer is rejected, the date the trial begins,
     or the 90th day after the date the offer is made.

Respondent argues that petitioner’s offers were not qualified

offers because they were not made during the qualified offer

period and because they do not specify the amount of petitioner’s

liability.8

     1. Qualified Offer Period

     Respondent argues that petitioner’s offers could not be a

qualified offer because they were not made within the qualified

offer period.   The qualified offer period begins on the date

respondent informs the taxpayer of a proposed deficiency and

“ending on the date which is 30 days before the date the case is

first set for trial.”   Sec. 7430(g).   Respondent interprets this



     8
       Respondent does not argue, and thus we do not consider,
that petitioner’s offer not be considered a qualified offer
because petitioner failed to provide respondent with the
substantiation and legal and factual arguments necessary for
informed consideration of petitioner’s claim for relief as
required by sec. 301.7430-7(c)(4), Proced. & Admin. Regs.
                                   - 13 -

provision to mean that if a case is not removed from the trial

calendar more than 30 days before the case is set for trial, then

a continuance will not serve to extend the qualified offer

period.    Sec. 301.7430-7(c), (e), Example (13), Proced. & Admin.

Regs.     Respondent thus concludes, pursuant to section 301.7430-

7(e), Proced. & Admin. Regs., that because all but one of

petitioner’s docketed cases were not removed from the trial

calendar more than 30 days before the date set for trial, the

qualified offer period for those cases expired before

petitioner’s offers.

     Petitioner, on the other hand, argues that it is possible to

interpret the qualified offer period to mean 30 days before the

case is first set for trial after the effective date of the

enactment of section 7430(c)(4)(E) and (g).        Thus, according to

petitioner, the relevant question is whether Congress intended

taxpayers such as petitioner to enjoy the benefit of the

qualified offer provision when their case had been calendared for

trial and then continued long before the Code was amended to add

the qualified offer rule.

     Congress defined the qualified offer period as “ending on

the date which is 30 days before the date the case is first set

for trial.”     Sec. 7430(g)(2).    Further, Congress made section

7430(c)(4)(E) effective for costs incurred more than 180 days

after enactment (July 22, 1998).       Internal Revenue Service
                               - 14 -

Restructuring and Reform Act of 1998, Pub. L. 105-206, sec.

3101(g), 112 Stat. 685, 729.   It is apparent Congress understood

the qualified offer provision would apply to cases already

pending before the Court.   However, if Congress intended the

qualified offer period to extend to the first time a case was set

for trial after enactment, it did not say as much.   We strictly

construe in favor of the Government the waiver of sovereign

immunity in section 7430.   Simpson v. Commissioner, T.C. Memo.

1995-194; see Ardestani v. INS, 502 U.S. 129, 137 (1991).

     Accordingly, the qualified offer period had expired at the

time petitioner submitted her qualified offer with respect to

taxable years 1980 through 1984.   However, respondent concedes

that petitioner submitted an offer within the qualified offer

period with respect to taxable year 1985.

     2.   Whether the Offer Clearly States the Amount Offered

     Respondent next argues that petitioner’s alleged qualified

offer fails because petitioner did not clearly specify the amount

being offered.9   Section 301.7430-7(c)(3), Proced. & Admin.



     9
      Respondent did not argue that petitioner’s offer was in bad
faith or lacked a reasonable relationship to the amount in issue.
See August v. Delta Air Lines, Inc., 600 F.2d 699, 702 (7th Cir.
1979), affd. on other grounds 450 U.S. 346, 355 (1981) (“The
plain language of * * * [Fed. R. Civ. P. 68] makes it unnecessary
to read a reasonableness requirement into the Rule.”). Although
the plain language of sec. 7430 does not include any requirement
that a taxpayer’s qualified offer be made in good faith or with a
reasonable relationship to the amount in controversy, respondent
did not raise the issue, and we do not consider it here.
                              - 15 -

Regs., provides that a qualified offer “specifies the offered

amount if it clearly specifies the amount for the liability of

the taxpayer * * *.   The offer may be a specific dollar amount of

the total liability or a percentage of the adjustments at issue

in the proceeding at the time the offer is made.”    The specified

amount “must be an amount, the acceptance of which by the United

States will fully resolve the taxpayer's liability, and only that

liability * * * for the type or types of tax and the taxable year

or years at issue in the proceeding.”     Id.

     Petitioner sent respondent a letter for each of the years at

issue offering to settle the case.     Petitioner’s offers included

the following terms of settlement for each year:

          1. Any adjustment the Service proposes to make
     with respect to the [1985] joint tax return filed by
     taxpayer and her husband shall not be made with respect
     to Rhita S. Lippitz.

          2. The taxpayer shall be granted relief from any
     additional joint liability, in its entirety, pursuant
     to IRC § 6015(c).

          3. Solely for purposes of this qualified offer,
     Rhita S. Lippitz shall make a payment of $100.00
     against any final adjustment determined by Decision or
     Stipulation with respect to the joint tax return for
     the [1985] tax year.

          4. No other adjustments shall be made in
     connection with the [1985] income tax return as it
     relates to Rhita S. Lippitz.

We find petitioner’s offer to clearly state the amount offered.

Petitioner offered to settle each docketed case for relief from

any additional joint liability pursuant to section 6015(c).    In
                                 - 16 -

addition, petitioner offered to make a payment of $100 against

any final adjustment determined with respect to the joint tax

return for each of the years at issue.     Thus, we find clear that

petitioner was offering to settle the petitions by paying $100

for each tax year and being relieved of any additional joint

liability under section 6015(c).

     3.     Whether Respondent’s Concession Is a Settlement

     Finally, with respect to petitioner’s qualified offer,

respondent argues that petitioner cannot be a prevailing party

under section 7430(c)(4)(E) because this matter was resolved by a

settlement.     Section 7430(c)(4)(E)(ii) provides that the

qualified offer rule shall not apply to “any judgment issued

pursuant to a settlement”.     After petitioner filed a motion for

partial summary judgment, respondent indicated to the Court that

he was conceding petitioner’s entitlement to innocent spouse

relief under section 6015(c).10     Respondent argues that his

concession means that judgment was entered pursuant to a

settlement.

     Respondent interprets section 7430(c)(4)(E)(ii) to mean that

the qualified offer provision does not apply where a taxpayer’s

liability “is determined exclusively pursuant to a settlement”.

Sec. 301.7430-7(a), Proced. & Admin. Regs.     Previously, in

Gladden v. Commissioner, 120 T.C. 446 (2003), we addressed


     10
          Petitioner’s motion was then denied as moot.
                              - 17 -

whether a settlement following several legal determinations

precluded the recovery of litigation fees pursuant to section

7430(c)(4)(E).   In Gladden, only after the parties litigated, and

this Court and the Court of Appeals for the Ninth Circuit

decided, legal issues integral to the adjustments at issues were

the parties able to enter into a settlement agreement.    We found

that judgment was not entered “exclusively” pursuant to the

settlement.   We have not, however, previously had the opportunity

to address facts such as those before us to decide whether

respondent’s concession of an issue constitutes a settlement for

purposes of section 7430(c)(4)(E)(ii).

      We apply the ordinary meaning of the term “settlement” as

used in section 7430 and find that respondent’s concession in

this case was not a settlement.    See Med. Transp. Mgmt. Corp. v.

Commissioner, 127 T.C. 96, 101 (2006); Pioneer Inv. Servs. Co. v.

Brunswick Associates Ltd. Pship., 507 U.S. 380, 388 (1993)

(“Courts properly assume, absent sufficient indication to the

contrary, that Congress intends the words in its enactments to

carry ‘their ordinary, contemporary, common meaning’.” (quoting

Perrin v. United States, 444 U.S. 37, 42 (1979))).

     On the facts before us, we find respondent’s concession was

not a settlement.   Petitioner first submitted her qualified offer

to respondent on July 1, 2005.    This offer would have resolved

the asserted deficiencies against petitioner for an increase in
                              - 18 -

her liability of $100 for each of the taxable years at issue.

Respondent did not respond to petitioner’s offer.   Later, after

receiving the recommendation of respondent’s CCISO office that

she was entitled to innocent spouse relief, petitioner again

submitted a settlement offer to respondent.   This time,

petitioner offered to settle the case for full relief from the

asserted liabilities under section 6015(c).   In the same letter,

petitioner informed respondent that in the absence of an

agreement resolving the matter, she intended to move for summary

judgment.   Respondent did not accept petitioner’s offer.

Instead, respondent offered to settle the matter if the agreement

included a statement by petitioner that she had no interest in

the assets of the trusts.

     True to her word, in the absence of respondent’s accepting

her offer, petitioner filed a motion for partial summary

judgment.   On the day after respondent was to file a response to

petitioner’s motion, respondent instead filed a motion for

additional time in which he expressed his intent to concede.     In

the light of petitioner’s multiple offers to settle and eventual

dispositive motion, we find respondent’s concession occurred too

late to be treated as a settlement.

     This is not to say that in all cases a concession could not

be a settlement.   We can imagine scenarios where a concession

would be difficult to differentiate from an agreement to settle.
                              - 19 -

However, that is not the case here.    It was not until after

petitioner actively litigated the issue––by filing a motion for

summary judgment––that respondent conceded she was entitled to

innocent spouse relief.   We find this akin to a concession after

trial.

     We do not believe Congress intended to grant respondent the

latitude to wait until just before the resolution of a

dispositive motion, or the end of a trial to concede a matter and

still benefit from the settlement exclusion of section

7430(c)(4)(E).   Section 7430 was designed to emulate Rule 68 of

the Federal Rules of Civil Procedure and encourage settlement by

imposing litigation costs on the party unwilling to settle.

Gladden v. Commissioner, supra at 450.    Respondent was unwilling

to settle this case on the terms and at the times offered by

petitioner.   Respondent cannot sidestep the consequences of such

refusal by conceding the issues after petitioner had effectively

presented the case for disposition by the Court.

C.   Net Worth Requirements

     Respondent also argues that petitioner has not established

that she meets the net worth requirements required to claim

litigation fees.   To qualify for an award of litigation costs,

the prevailing taxpayer cannot have a net worth that exceeded $2

million at the time the petition was filed.    Sec.

7430(c)(4)(A)(ii); 28 U.S.C. sec. 2412(d)(2)(B) (2000).
                               - 20 -

Petitioner has filed affidavits averring that her net worth was

less than $2 million at the time her amended petitions were filed

as well as when the original petitions were filed.    We find

petitioner’s submissions to be credible, and respondent has

offered no evidence to contradict petitioner’s statements.

Accordingly, we are satisfied that petitioner meets the net worth

requirements.

D.   Whether Petitioner Protracted the Proceedings

     Respondent argues that petitioner is not entitled to an

award of litigation costs because she unreasonably protracted the

proceedings.    Sec. 7430(b)(3) (“No award for reasonable * * *

costs may be made * * * with respect to any portion of the * * *

court proceeding during which the prevailing party has

unreasonably protracted such proceeding.”).   Respondent faults

petitioner for not complying with a summons originally dated

October 5, 1987.    Respondent attempted to resurrect the summons

in January 2006, in a letter to petitioner.

     According to respondent’s records, the summons issued to

petitioner was served by leaving a copy at the abode of Mr.

Lippitz.   The other evidence before the Court suggests that

before 2003, petitioner was not in a position to play an active

role in responding to the summons in question.    Accordingly, we

cannot find fault in petitioner’s failure to comply with the 20

year old summons where there is no evidence that petitioner even
                              - 21 -

knew of the summons until January 2006.   We find that petitioner

has not unreasonably protracted the proceedings.

E.   Reasonable Litigation Costs

     Finally, respondent argues that the fees claimed by Ms.

Hawkins are unreasonable.   We agree with respondent that no

departure from the statutory rates is called for in this case.

     The award of attorney’s fees under section 7430 is generally

limited to the statutory rate11 “unless the court determines that

* * * a special factor, such as the limited availability of

qualified attorneys for such proceeding, the difficulty of the

issues presented in the case, or the local availability of tax

expertise, justifies a higher rate.”   Sec. 7430(c)(1)(B)(iii).

     Ms. Hawkins claims that an upward departure to her billing

rate of $350 an hour is warranted because of her extensive

experience dealing with innocent spouse relief and because the 10

lawyers who had previously represented petitioner were unable to

obtain such relief.   While we do not question that Ms. Hawkins

has a wealth of experience that in some case might justify an

upward departure from the statutory rate, this is not such a

case.

     We find nothing particularly complex about the law or the


     11
      An award for fees incurred in 2004 and 2005 is limited to
$150 per hour. Rev. Proc. 2003-85, sec. 3.33, 2003-2 C.B. 1184,
1190; Rev. Proc. 2004-71, sec. 3.35, 2004-2 C.B. 970, 976. An
award of fees incurred in 2006 is limited to $160 an hour. Rev.
Proc. 2005-70, sec. 3.36, 2005-2 C.B. 979, 985.
                               - 22 -

facts of petitioner’s claim.    Ms. Hawkins moved to amend the

petitions and asserted a claim for innocent spouse relief under

section 6015(c).   Ms. Hawkins, on behalf of petitioner, sent

respondent two offers to settle the case and asked that

petitioner’s claim be evaluated by CCISO.    Upon respondent’s

failure to settle the case and upon receipt of CCISO’s

determination, Ms. Hawkins drafted and filed a motion for partial

summary judgment arguing that, in accordance with CCISO’s

determination, there was no evidence to suggest that petitioner

had any actual knowledge of the erroneous items.    Respondent was

ultimately unable to discover facts supportive of his position

that petitioner did have knowledge of the items giving rise to

the deficiency.    Thus, while Ms. Hawkins achieved a successful

result for her client, there is nothing that convinces this Court

that a similar result would not also have been achieved by an

attorney with a more limited knowledge of the Internal Revenue

Code, generally, and section 6015, specifically.    Accordingly, we

find no reason to depart from the statutory rate.

     Further, as respondent points out, it appears Ms. Hawkins

billed her client for associate time at $125 an hour but seeks

recovery of fees for her associate at $150 an hour.    We find that

petitioner is only entitled to recover fees for the amount

actually incurred for the associate’s time.
                              - 23 -

F.   Conclusion

     We find that petitioner is entitled to an award of

litigation costs for all of the docketed cases from the date

respondent filed his answer to the amended petitions, as

petitioner was the prevailing party, and respondent was not

substantially justified.   Petitioner is also entitled to an award

of litigation costs for the period before respondent filed his

answer, on the basis that petitioner submitted a qualified offer

for taxable year 1985, and petitioner’s liability for 1985 was

found by this Court to be less than if respondent had accepted

this offer.   We note, however, that the record is insufficient to

distinguish petitioner’s litigation costs related to the 1985 tax

year from those related to the 1980 through 1984 tax years.

Petitioner will bear the burden of demonstrating which costs

incurred between the qualified offer and respondent’s answer

should be allocated to the 1985 tax year.    Additionally,

petitioner is entitled to an award of the costs associated with

the current motion.   See Commissioner, INS v. Jean, 496 U.S. 154,

161-162 (1990).

     To reflect the foregoing,

                                      An appropriate order will be

                                 issued.
