                       T.C. Memo. 1998-400



                     UNITED STATES TAX COURT



                  WAYNE C. MASON, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 3671-97.                   Filed November 12, 1998.



     Wayne C. Mason, pro se.

     John A. Freeman, for respondent.



                       MEMORANDUM OPINION



     ARMEN, Special Trial Judge:   This matter is before the Court

on petitioner's motion for an award of litigation costs under

section 7430 and Rules 230 through 233.1

     1
          Unless otherwise indicated, all section references are
to the Internal Revenue Code in effect for 1993, the taxable year
                                                   (continued...)
                               - 2 -

     After concessions by respondent,2 the issues for decision

are as follows:

     (1) Whether petitioner unreasonably protracted the court

proceeding.   We hold that he did not.

     (2) Whether the litigation costs claimed by petitioner are

reasonable.   We hold that a portion of the litigation costs

claimed by petitioner are not 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.   Rule 232(a)(2).   We

therefore decide the matter before us based on the record that

has been developed to date.

Background

     Petitioner resided in Barnesville, Ohio, at the time that

his petition was filed with the Court.

     By notice of deficiency dated December 11, 1996, respondent

determined a deficiency in petitioner's Federal income tax for

     1
      (...continued)
in issue. However, all references to sec. 7430 are to such
section in effect at the time that the petition was filed. All
Rule references are to the Tax Court Rules of Practice and
Procedure.
     2
        Respondent concedes: (1) Petitioner exhausted his
administrative remedies, see sec. 7430(b)(1); (2) petitioner
substantially prevailed, see sec. 7430(c)(4)(A)(i); (3)
respondent's position at the time the notice of deficiency was
issued and at the time respondent's answer was filed was not
substantially justified, see sec. 7430(c)(4)(B); and (4)
petitioner satisfies the applicable net worth requirement, see
sec. 7430(c)(4)(A)(ii).
                               - 3 -

the taxable year 1993 in the amount of $4,778, as well as

additions to tax under sections 6651(a) and 6654(a) in the

amounts of $1,194.50 and $200.17, respectively.

     By petition filed February 20, 1997, petitioner commenced

his case in this Court.   Petitioner was not aided by counsel in

preparing or filing his petition.    Pursuant to the Court's order

for amended petition and filing fee, petitioner filed an amended

petition on March 17, 1997, through his attorney, Robert Giffin.

In this regard, attorney Giffin charged petitioner 3.4 hours of

service for "Redrafting and proof of Tax Court Amended petition;

entry of appearance; and Request for Place of Trial" and .5 hours

for meeting with petitioner, at $125 per hour.    Subsequently, by

motion filed May 1, 1997, and granted May 29, 1997, petitioner

withdrew attorney Giffin as counsel.

     By letter dated May 1, 1997, respondent's Appeals officer

requested information in support of petitioner's allegations

contained in the amended petition.     On May 13, 1997, respondent

filed an answer to petitioner's amended petition, denying various

allegations made by petitioner for lack of sufficient knowledge.

Petitioner's subsequent counsel, James B. Curtin, provided the

requested information to the Appeals officer by letter dated July

15, 1997.   In this regard, attorney Curtin charged petitioner

$200 for his services.

     On August 14, 1997, respondent conceded the determinations

in the notice of deficiency and sent a proposed settlement
                                    - 4 -

document to petitioner's then former counsel, attorney Giffin.

Having received no reply, respondent mailed petitioner a proposed

settlement document reflecting respondent's concession of the

deficiency notice determinations on three subsequent occasions,

March 16, April 10, and May 4, 1998.         Respondent requested that

petitioner sign and return the proposed settlement document so

that the parties could avoid an appearance on the designated

trial date, May 18, 1998.       Petitioner declined to sign the

proposed settlement document because no agreement could be

reached regarding the recovery of litigation costs.

      At the calendar call on May 18, 1998, respondent orally

conceded the determinations in the notice of deficiency.

Pursuant to the Court's Order, a stipulation of settled issues

was filed on July 6, 1998.       Petitioner filed his motion for

litigation costs on June 30, 1998, seeking recovery for the

following costs:

      Postage costs1                                  $13.58
      Filing fee                                       60.00
                                                    2
      Fees paid to attorney Giffin                    487.50
      Fees paid to attorney Curtin                    200.00
      Mileage - 3,792 miles
      1
       To the extent any litigation costs are to be awarded in this case,
respondent does not contest the postage costs.
      2
       Actually, petitioner claims $547.50 in fees paid to attorney Giffin.
However, the $547.50 amount includes $60 in filing fee. For accuracy, we have
properly reflected the figures as $487.50 for attorney's fees and $60 for
filing fee.

      With the exception of 245 miles and $8.54 in postage costs,

all of the foregoing costs were incurred on or before March 16,
                                 - 5 -

1998, the date on which respondent first mailed petitioner a

proposed settlement document.3    All of the costs associated with

attorney Giffin's services were incurred in 1997.    Apparently,

attorney Curtin provided a portion of his services in 1997 and

another portion in 1998.

Discussion

     We apply section 7430 as amended by the Taxpayer Bill of

Rights 2 (TBOR 2), Pub. L. 104-168, secs. 701-704, 110 Stat.

1452, 1463-1464 (1996).    The amendments made by TBOR 2 apply in

the case of proceedings commenced after July 30, 1996.    TBOR 2

secs. 701(d), 702(b), 703(b), and 704(b), 110 Stat. 1463-1464.

Inasmuch as the petition herein was filed on February 20, 1997,

the amendments made by TBOR 2 apply in the present case.4

     A. Requirements for a Judgment Under Section 7430

     3
        In this regard, we ignore the proposed settlement
document mailed to petitioner's former attorney because attorney
Giffin had already been withdrawn and there is no indication that
the proposed settlement document mailed to attorney Giffin was
received by petitioner.
     4
        Congress has amended sec. 7430 twice since Taxpayer Bill
of Rights 2, Pub. L. 104-168, 110 Stat. 1452 (1996). First,
Congress amended sec. 7430 in the Taxpayer Relief Act of 1997
(TRA), Pub. L. 105-34, secs. 1285, 1453, 111 Stat. 788, 1038-
1039, 1055. Second, Congress amended sec. 7430 in the IRS
Restructuring and Reform Act of 1998 (RRA), Pub. L. 105-206, sec.
3101, 112 Stat. 685, 727-730. However, the amendments made by
TRA do not apply in the case of proceedings commenced before Aug.
5, 1997, and the amendments made by RRA apply only to costs
incurred more than 180 days after July 22, 1998. Inasmuch as the
petition herein was filed on Feb. 10, 1997, and all of the
claimed costs were incurred no later than May 18, 1998 (the trial
date), the amendments made by TRA and RRA do not apply in the
present case.
                                 - 6 -

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

incurred in connection with a court proceeding may only be

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

exhausted his or her administrative remedies within the Internal

Revenue Service (IRS); and (3) did not unreasonably protract the

court proceeding.   Sec. 7430(a) and (b)(1), (3).    A taxpayer must

satisfy each of these three requirements in order to be entitled

to a judgment under section 7430.    Rule 232(e).   Upon

satisfaction of these requirements a taxpayer may be entitled to

"reasonable litigation costs".    Sec. 7430(a)(2), (c)(1).

     Respondent concedes that petitioner was the prevailing party

in the court proceeding.    Respondent also concedes that

petitioner exhausted his administrative remedies within the IRS.

Respondent contends, however, that petitioner unreasonably

protracted the court proceeding and that the litigation costs

claimed are unreasonable.



     B.   Unreasonable Protraction of the Court Proceeding

     Pursuant to section 7430(b)(3), "No award for reasonable

litigation * * * costs may be made * * * with respect to any

portion of the * * * court proceeding during which the prevailing

party has unreasonably protracted such proceeding."

     Respondent mailed petitioner a proposed settlement document

on three separate occasions--the earliest on March 16, 1998.

Respondent contends that petitioner unreasonably protracted the
                                - 7 -

court proceeding by failing to sign and return the proposed

settlement document mailed to him on March 16, 1998.   If

petitioner unreasonably protracted the court proceeding, then

petitioner may not be entitled to any recovery for litigation

costs incurred after receipt of the proposed settlement document.

With respect to costs incurred after March 16, 1998, petitioner

claims recovery only for mileage (245 miles) and a postage

expense of $8.54.

     We have previously held that a taxpayer's refusal to sign a

stipulated decision does not constitute unreasonable protraction

of the proceeding when the taxpayer's refusal is based upon the

parties' failure to reach an agreement regarding litigation

costs.   Buck v. Commissioner, T.C. Memo. 1993-16.   In Buck, the

Commissioner sent the taxpayer a proposed stipulated decision

about 3 weeks before the scheduled trial date.   The taxpayer's

attorney met with the Commissioner's attorney, but no agreement

was reached regarding the taxpayer's litigation costs.   Under

those circumstances, we held that the taxpayer did not

unreasonably protract the proceeding by refusing to sign the

stipulated decision and appearing at the calendar call to request

an award of litigation costs.

     Similarly, in the instant case, petitioner's failure to sign

the proposed settlement document was based on the fact that no

agreement regarding litigation costs could be reached between the

parties.   At the earliest, respondent mailed petitioner a
                                  - 8 -

proposed settlement document about 2 months prior to the

scheduled trial date.    Petitioner declined to sign the proposed

settlement document because no agreement had been reached

regarding litigation costs.      Rather, petitioner appeared at trial

to request an award of litigation costs.      Under these

circumstances, we hold that petitioner did not unreasonably

protract the court proceeding.

     C.   Reasonableness of Litigation Costs

     In the case of a prevailing party, section 7430(a)(2)

provides for the recovery of "reasonable litigation costs".

Section 7430(c)(1) defines reasonable litigation costs to include

reasonable court costs and reasonable expenses of expert

witnesses, studies, and attorney's fees.




     1.   Attorney's Fees

     Generally, reasonable attorney's fees are limited to $110

per hour.    Sec. 7430(c)(1)(B)(iii).     However, an adjustment may

be made for an increase in the cost of living or the existence of

a special factor, such as the limited availability of qualified

attorneys.    Sec. 7430(c)(1).

     Petitioner claims attorney's fees for the services of two

different attorneys.    Petitioner's first counsel, attorney

Giffin, assisted petitioner by meeting with petitioner and

drafting the amended petition.     In this regard, petitioner claims
                               - 9 -

recovery for 3.9 hours at $125 per hour for attorney Giffin's

services.   We do not think that 3.9 hours is an unreasonable

amount of time for attorney Giffin's services.   However,

petitioner may not recover at a rate in excess of $110 per hour

for attorney Giffin's services.   There is no persuasive evidence

that the availability of qualified attorneys to aid petitioner in

redrafting the petition was limited.   See sec. 7430(c)(1).

Further, after application of the 1997 cost-of-living adjustment,

the statutory rate is nevertheless limited to $110 per hour.    See

sec. 7430(c)(1); Rev. Proc. 96-59, 1996-2 C.B. 392, 396.

Accordingly, petitioner's recovery for attorney Giffin's services

will be limited to 3.9 hours at $110 per hour, or $429.

     Petitioner also claims recovery for $200 in attorney's fees

incurred with respect to attorney Curtin's services.   Attorney

Curtin assisted petitioner in providing the Appeals officer with

the requested documentation that resulted in respondent's

concession of the issues raised in the notice of deficiency.

Petitioner claims $200 in attorney's fees for attorney Curtin's

services.   We think that petitioner's claim of $200 in this

regard meets the applicable standard and is reasonable.5

     2.   Mileage

     Petitioner claims recovery for mileage with regard to 3,792

miles of travel allegedly incurred in connection with this case.

     5
        A $200 expense for attorney Curtin's services translates
into 1.8 hours of service at a rate of $110 per hour.
                                - 10 -

Section 7430 defines reasonable costs to include court costs,

cost of studies, expert fees, and attorney's fees.    Mileage

incurred by a taxpayer is not within the definition of reasonable

costs and is therefore not recoverable under section 7430.      See

Buck v. Commissioner, T.C. Memo. 1993-16.    Accordingly,

petitioner may not recover costs for mileage.6

     3.    Filing Fee and Postage Costs

     Reasonable litigation costs include reasonable court costs.

Sec. 7430(c)(1)(A).    Petitioner is therefore entitled to recover

the $60 Tax Court filing fee.

     Finally, and as previously noted, respondent concedes the

postage costs if petitioner is entitled to an award of litigation

costs.    Because petitioner is entitled to recover reasonable

litigation costs, he may recover the postage costs.

     To reflect our disposition of the disputed issues and

respondent's concessions,



                                          An appropriate order and

                                     decision will be entered.




     6
        Regardless, we note that the majority of the mileage
claimed by petitioner is not reasonable.
