Unpublished Disposition, 940 F.2d 667 (9th Cir. 1990)

MEMORANDUM^** 

Janie Y. Brice appeals pro se the tax court's decision denying her application for attorneys fees pursuant to 26 U.S.C. § 7430. The tax court found that the government's position was substantially justified and therefore denied attorneys fees. We have jurisdiction pursuant to 26 U.S.C. § 7482, and affirm.

We review the tax court's determination that the government's position was substantially justified for abuse of discretion. Bertolino v. Commissioner, 930 F.2d 759, 761 (9th Cir. 1991).

Section 7430 provides that the prevailing party may be awarded a judgment for reasonable litigation costs incurred in connection with a court proceeding against the United States for the determination or refund of a tax. 26 U.S.C. § 7430(a). A party is considered a prevailing party only if (1) the position of the United States in the proceeding was not substantially justified; (2) the party substantially prevailed with respect to the amount in controversy or with respect to the most significant issue(s) presented; and (3) the party in question has a net worth of not more than $2,000,000 at the time the proceeding was commenced. 26 U.S.C. § 7430(c) (4). Additionally, litigation costs will not be awarded unless the party had exhausted administrative remedies with the Internal Revenue Service ("IRS") prior to commencing the action in court. 26 U.S.C. § 7430(b) (1). A taxpayer seeking litigation costs has the burden of establishing entitlement under section 7430. Tax Court Rule 232(e); Sliwa v. Commissioner, 839 F.2d 602, 609 (9th Cir. 1988).

Here, the government conceded that Brice substantially prevailed and that she exhausted administrative remedies. The government contended, however, and the tax court found, that the position of the United States was substantially justified. Brice contests this finding on appeal.

The position of the government must be reasonable under the circumstances given the facts available to the government. United States v. Harvis, 857 F.2d 1360, 1365 (9th Cir. 1988). Section 7430 defines the position of the United States as follows:

the position taken by the United States in a judicial proceeding ... as of the earlier of

(i) the date of the receipt by the taxpayer of the notice of the decision of the Internal Revenue Service Office of Appeals, or

(ii) the date of the notice of deficiency.

26 U.S.C. § 7430(c) (7). Here, no notice of decision of the Appeals Office of the IRS was ever issued to taxpayer. Thus, the government's position is determined as of the date of the notice of deficiency, May 16, 1989.

Here, the IRS sent Brice a notice of deficiency based on its determination that she was jointly and severally liable for an understatement on her 1982 joint tax return and for additions to tax. Brice filed a petition for redetermination alleging that she was entitled to innocent spouse protection pursuant to 26 U.S.C. § 6013(e). Brice had the burden of establishing that she was entitled to such protection. See Sliwa, 839 F.2d at 608. Brice failed to attach any supporting documentation to her petition. On October 25, 1989, the IRS filed its answer generally denying taxpayer's allegations and responding that it lacked present knowledge regarding taxpayer's allegations that she was entitled to innocent spouse relief. Between October 4, and October 21, 1989, Brice, through her attorney, provided the IRS with supporting documentation showing she was entitled to innocent spouse protection. On November 13, 1989, the Appeals Officer in charge of Brice's petition mailed her attorney a proposed stipulated decision conceding that Brice was an innocent spouse. On January 4, 1990, the agreed stipulated decision was entered by the tax court.

Given the facts available to the IRS when it filed its answer, its position was substantially justified. See Harvis, 857 U.S. at 1365. Further, when the IRS was provided with information substantiating Brice's entitlement to innocent spouse relief, it acted in a reasonable time to resolve the case. See Bertolino, 930 F.2d at 761. Accordingly, the tax court did not abuse its discretion in determining that the position of the government was substantially justified and Brice was not entitled to attorneys fees.¹ 

AFFIRMED.