                        T.C. Memo. 2006-224



                      UNITED STATES TAX COURT



                RICHARD A. CLOWARD, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 16460-05.              Filed October 23, 2006.



     Lowell E. Mann, for petitioner.

     David A. Breen, for respondent.



                        MEMORANDUM OPINION


     WELLS, Judge:   The instant matter is before the Court on

petitioner’s motion for reasonable administrative and litigation

costs1 pursuant to Rule 2312 and section 7430.   The issue we must


     1
      Although petitioner titled the instant motion “MOTION FOR
AWARD OF REASONABLE ADMINISTRATIVE COSTS”, the attached list of
costs includes both administrative and litigation costs. We
                                                   (continued...)
                               - 2 -

decide is whether petitioner was the prevailing party.     For the

reasons stated below, we deny petitioner’s motion for reasonable

costs.

                            Background

     At the time of filing the petition in the instant case,

petitioner resided in Trenton, New Jersey.   Vanya Tyrrell (Mrs.

Tyrrell) prepared petitioner’s 2002 Form 1040, U.S. Individual

Income Tax Return (tax return).3

     In the spring of 2005, respondent sent a letter to

petitioner requesting that he submit documentation to support

certain deductions claimed on his 2002 tax return.   This was the

initial contact letter and did not provide petitioner an

opportunity for administrative review with respondent’s Office of

Appeals.   Petitioner did not respond with the requested

documentation.   Instead, petitioner’s attorney, Lowell E. Mann

(Mr. Mann), sent a letter protesting respondent’s proposed



     1
      (...continued)
treat petitioner’s motion as a motion for both administrative and
litigation costs.
     2
      Unless otherwise indicated, all Rule references are to the
Tax Court Rules of Practice and Procedure, and all section
references are to the Internal Revenue Code, as amended.
     3
      Petitioner’s tax return was one of approximately 175 tax
returns that were prepared by Vanya Tyrrell and chosen for
examination by respondent’s Correspondence Examination Unit. All
such cases involve similar unsubstantiated deductions. Lowell E.
Mann represents the petitioners in all such cases and has filed
virtually identical petitions for each such case.
                                 - 3 -

adjustments and requesting that the case be transferred to

respondent’s Appeals Office.   Because petitioner failed to submit

the requested documentation substantiating the disputed

deductions, respondent determined a deficiency of $750 in income

tax for 2002 and sent petitioner a notice of deficiency on

June 13, 2005.

     Mr. Mann sent a letter to respondent requesting that

respondent rescind the notice of deficiency.    Respondent did not

rescind the notice of deficiency, and petitioner timely filed his

petition in this Court on September 6, 2005.    Respondent filed

his answer on October 25, 2005.    By notice dated November 10,

2005, the instant case was placed on the April 3, 2006, calendar

in Philadelphia, Pennsylvania.

     On February 18, 2006, Ms. Tyrrell sent documentation to

support the deductions in question to Mr. Mann, who forwarded it

to respondent’s Appeals officer.    At the call of the instant case

from the Philadelphia trial session calendar on April 3, 2006,

the parties filed a stipulation of settled issues, which

indicated respondent’s concession and a reduced deficiency of

$480.   In the instant motion, petitioner now seeks $3,152.50 in

administrative and litigation costs.

                            Discussion

     The prevailing party in a Tax Court proceeding may be

entitled to recover administrative and litigation costs.    See
                                - 4 -

sec. 7430(a); Rule 231.    However, a taxpayer will not be treated

as the prevailing party if the Commissioner’s position was

substantially justified.   Sec. 7430(c)(4)(B); see Pierce v.

Underwood, 487 U.S. 552, 565 (1988).    The fact that Commissioner

concedes is not determinative of the reasonableness of

Commissioner’s position.    Wasie v. Commissioner, 86 T.C. 962, 969

(1986).   The taxpayer bears the burden of proving the elements in

section 7430 required for an award of costs, except that the

taxpayer will not be treated as the prevailing party if the

Commissioner establishes that the position of the Commissioner

was substantially justified.4   See Rule 232(e).

     The Court determines the reasonableness of respondent’s

position as of the time respondent took respondent’s position.

Sec. 7430(c)(7).   In the administrative proceeding here,

respondent took a position as of the date of the notice of

deficiency.   Sec. 7430(c)(7)(B).   In the judicial proceeding,

respondent took a position when respondent filed respondent’s

answer.   Sec. 7430(c)(7)(A); Huffman v. Commissioner, 978 F.2d

1139, 1144-47 (9th Cir. 1992), affg. in part, revg. in part on

other grounds and remanding T.C. Memo. 1991-144.    Respondent’s

administrative and litigation positions are substantially




     4
      The elements of sec. 7430 other than those relevant to
whether petitioner was the prevailing party are not discussed.
                               - 5 -

justified if they have a reasonable basis in both law and fact.

Maggie Mgmt. Co. v. Commissioner, 108 T.C. 430, 443 (1997).

     In the instant case, we conclude that respondent’s position

was both reasonable and substantially justified in both the

administrative and judicial proceedings.   Petitioner failed to

provide the requisite documentation until after respondent issued

the notice of deficiency and filed an answer.   Deductions are a

matter of legislative grace, and petitioner must prove he is

entitled to the deductions.   Rule 142(a); New Colonial Ice Co. v.

Helvering, 292 U.S. 435, 440 (1934).   In the absence of any proof

of entitlement to the disputed deductions, respondent was

reasonable to maintain his position that the disputed deductions

were not allowed.   Prouty v. Commissioner, T.C. Memo. 2002-175.

It was not until February 18, 2006, that Ms. Tyrrell sent the

documentation relating to the disputed deductions to Mr. Mann.5

Respondent conceded the propriety of the deductions upon




     5
      Respondent also contends that petitioner protracted the
instant proceedings and is therefore ineligible for cost
recovery. Sec. 7430(b)(3). Although we do not address that
issue, since we have disposed of the instant motion on other
grounds, we note that petitioner did not provide the required
documentation to support his claimed deductions until less than
2 months before trial. Once in possession of the requested
documentation, respondent presumably would have conceded the
deductions at any point in the administrative or litigation
process, as respondent ultimately did on the eve of trial after
receiving the documentation. Consequently, petitioner forced an
administrative proceeding and litigation, instead of a brief
exchange of correspondence.
                                 - 6 -

receipt of the documentation.    Accordingly, we hold that

petitioner is not entitled to recover his administrative or

litigation costs.

     We have considered all of petitioner’s contentions,6 and,

to the extent they are not addressed herein, they are irrelevant,

moot, or without merit.

     To reflect the foregoing,


                                              An appropriate order and

                                         decision will be entered.




     6
      This includes both arguments made in petitioner’s motion
and subsequent memorandum of law.
