                        T.C. Memo. 2001-322



                      UNITED STATES TAX COURT



                FRANCESCA CAPPUCCI, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 1967-00.                  Filed December 28, 2001.




     Francesca Cappucci, pro se.

     Angelique M. Neal, for respondent.



                        MEMORANDUM OPINION


     GERBER, Judge:   Respondent moved for summary judgment on the

question of whether petitioner is entitled to administrative
                               - 2 -

costs under section 74301 in excess of those allowed by

respondent.   There is no disagreement about any material facts,

and the controverted issue involves a legal question that is ripe

for summary judgment.   Rule 121(b); Fla. Peach Corp. v.

Commissioner, 90 T.C. 678, 681 (1988); Shiosaki v. Commissioner,

61 T.C. 861, 862 (1974).

Background

     Respondent, in a notice dated November 19, 1999, determined

that petitioner was not entitled to $7,611 of $10,000 claimed

administrative costs.   Conversely, respondent determined that

petitioner was entitled to $2,389 of administrative costs, which

represented the costs incurred by petitioner for the services of

a qualified representative after the issuance of a notice of

deficiency on January 26, 1996, concerning petitioner’s 1992 and

1993 tax years.   Petitioner, under section 7430(f)(2), filed a

petition with this Court appealing respondent’s decision to allow

only a part of her claim for administrative costs.

     On October 13, 1994, respondent commenced an examination of

petitioner’s 1993 income tax return, and, on or about November

28, 1994, respondent commenced an examination of petitioner’s



     1
       All section references are to the Internal Revenue Code as
amended and in effect for the period under consideration, and all
Rule references are to the Tax Court Rules of Practice and
Procedure, unless otherwise indicated.
                               - 3 -

1992 income tax return.   Petitioner was represented by an

accountant during the examinations.    On January 26, 1996,

respondent mailed a notice of deficiency to petitioner, and no

petition was filed with this Court.    However, petitioner did seek

respondent’s reconsideration of the audit, which began on or

about February 2, 1996, and on or about April 4, 1996, respondent

determined that the income tax deficiencies for 1992 and 1993

should be reduced.   Dissatisfied, petitioner sought another

reconsideration and on or about August 5, 1998, respondent

determined that petitioner’s income tax deficiencies for 1992 and

1993 should be further reduced.

     Thereafter, on or about November 21, 1998, petitioner

submitted a claim for the accounting fees she incurred.

Respondent determined that under section 7430(c)(2), petitioner

was entitled to costs (accounting fees) incurred for services of

a qualified representative only after the issuance of the notice

of deficiency issued January 26, 1996.    Based on the accountant’s

invoices to petitioner, respondent determined that petitioner was

entitled to $2,389 of costs attributable to the work performed

after the issuance of the notice of deficiency.

Discussion

     Section 7430 provides for the recovery by a taxpayer of

certain costs incurred in connection with an administrative
                                 - 4 -

proceeding with the Internal Revenue Service (IRS).    Under

section 301.7430-2(b), Proced. & Admin. Regs., there are several

requirements that a taxpayer must meet in order to be entitled to

administrative costs.   Respondent agrees that petitioner met all

but one of those requirements.    In particular, respondent

contends that not all of the costs sought by petitioner were

incurred on or after the administrative proceeding date as

defined in section 301.7430-3(c), Proced. & Admin. Regs.

     Under section 7430(c)(2) and section 301.7430-3(c), Proced.

& Admin. Regs., the “administrative proceeding date” is defined

to be the earlier of (1) the date of the receipt by the taxpayer

of the notice of decision of the IRS Office of Appeals, or (2)

the date of the notice of deficiency.

     Congress, in the Internal Revenue Service Restructuring and

Reform Act of 1998, Pub. L. 105-206, sec. 3101, 112 Stat. 727,

amended section 7430 in a manner which would have permitted

petitioner to claim additional administrative costs.    Those

amendments, however, apply to costs that were incurred more than

180 days after July 22, 1998.    Unfortunately, the costs claimed

by petitioner were all incurred prior to October 15, 1998.

     Petitioner has explained that, from the very beginning in

1994, respondent’s examiner’s contacts with petitioner, her

business associates, and others made the examination a “painful,
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humiliating and arduous experience for * * * [her] * * * and

[her] husband.”   Petitioner also points out that the proposed

deficiencies started at $1,727 for 1992 and $9,550 for 1993 and

ended in agreed amounts of zero for 1992 and $315 for 1993.      In

that regard, however, respondent does not question whether

petitioner is entitled to administrative costs.   Respondent

agrees that petitioner is entitled to such costs, but

only to the amount incurred from the time of the issuance of the

notice of deficiency.2

     Petitioner contends that sections 301.7430-2(a) and (b) and

301.7430-3(a), Proced. & Admin. Regs., provide a basis for

allowance of the costs (accountant’s fees) that respondent has

declined to permit.   Petitioner contends that those procedural

regulations provide the Court with authority to grant reasonable

costs to petitioner, including the amount that was incurred prior

to respondent’s issuance of the notice of deficiency.

     Section 301.7430-2(a) and (b), Proced. & Admin. Regs., sets

forth the requirements and procedures for recovery of reasonable

administrative costs.    In particular, section 301.7430-2(a),

Proced. & Admin. Regs., is introductory and generally describes

the contents of the regulation.



     2
       There is no mention here of notice’s of decision being
issued by the Appeals Office.
                               - 6 -

     Section 301.7430-2(b)(1), Proced. & Admin. Regs., contains

seven requirements, all but one of which respondent agrees

petitioner has met.   As explained above, respondent contends that

petitioner’s recovery is limited to costs incurred, in this case,

after the mailing of the notice of deficiency.

     Section 301.7430-2(b)(2), Proced. & Admin. Regs., is

entitled “Determination by court”.     That section defines the

circumstances where the Court may award reasonable administrative

costs, but does not provide the Court with authority or a basis

on which to vary from the statutory limitation of reasonable

administrative costs incurred (in this case) after the date of

the notice of deficiency.   See sec. 7430(c)(2)(B).

     Finally, section 301.7430-3(a), Proced. & Admin. Regs.,

describes an “administrative proceeding generally * * * [as] any

procedure or other action before the Internal Revenue Service

that is commenced after November 10, 1988.”     That procedural

regulation also describes specific proceedings that are not

“administrative proceedings” within the purview of section 7430.

Petitioner relies on the broad definition of administrative

proceedings in support of her argument that she is entitled to

the administrative costs incurred prior to respondent’s issuance

of the notice of deficiency.

     We are sympathetic to petitioner’s cause.     She is obviously

qualified to receive appropriate costs, but for the statutory
                                 - 7 -

provisions of section 7430(c)(2)(B) limiting administrative costs

to those incurred after a particular event (in this case the

mailing of the notice of deficiency).       We also note that

respondent is in agreement that petitioner is entitled to all

administrative costs permitted by the statute.       It is also clear

that Congress was sympathetic to taxpayers’ inability to obtain

costs, in appropriate circumstances, that were incurred earlier

than the time prescribed by section 7430(c)(2)(B).       Congress,

however, did not see fit to retroactively extend the modification

of the period for recovery of additional administrative costs to

the period of time within which petitioner incurred the costs in

question.   Accordingly, we are bound by Congress’s clear and

unequivocal mandate.

     To reflect the foregoing,

                                         An order and decision will be

                                 entered granting respondent’s

                                 Motion For Summary Judgment and

                                 approving respondent’s notice of

                                 decision regarding the amount of

                                 costs to which petitioner is

                                 entitled.
