1988 U.S. Tax Ct. LEXIS 46">*46 After reaching a settlement agreement, petitioners moved for an award of litigation costs.
90 T.C. 702">*702 OPINION
This case is before us on petitioners' motion for reasonable litigation costs under
1988 U.S. Tax Ct. LEXIS 46">*47 Petitioners Virgil M. and Lois Whitesell are husband and wife and resided in London, England, at the time they filed their petitions herein.
By notice of deficiency dated September 3, 1982, respondent determined a deficiency in petitioners' Federal income tax for 1978 of $ 8,770.24 and an addition to tax under
By notice of deficiency dated December 20, 1982, respondent determined the following deficiencies in petitioners' Federal income tax:
Additions to tax | ||||
Year | Deficiency | Sec. 6651(a) | Sec. 6653(a) | Sec. 6653(b) |
1977 | $ 16,046.66 | $ 3,209.33 | $ 835.08 | 0 |
1979 | 1,256.00 | 0 | 0 | $ 628.00 |
1980 | 13,460.88 | 0 | 0 | 6,730.44 |
The petition relating to this notice of deficiency was timely filed on May 2, 1983, and assigned docket No. 9885-83.
On January 17, 1983, petitioners' request for Columbus, Ohio, as the place of trial in docket No. 29402-82 was granted. On May 2, 1983, petitioners' request for Columbus, Ohio, as the place of trial in docket No. 9885-83 was granted. On March 1, 1984, petitioners' 1988 U.S. Tax Ct. LEXIS 46">*48 motion to consolidate docket No. 29402-82 and docket No. 9885-83 for purposes of trial, briefing, and opinion was granted. On August 21, 1985, petitioners moved to change the place of trial from Columbus to Detroit, Michigan, because their counsel had moved his office to Michigan. The motion was granted on August 23, 1985.
The consolidated cases were set for trial on the May 12, 1986, Detroit calendar. Petitioners moved for a continuance, which was granted on March 7, 1986, and the cases were again set for trial, on the March 9, 1987, Detroit calendar.
After they were set for trial, the parties agreed to settle the two cases for the following amounts:
Additions to tax | ||||
Year | Deficiency | Sec. 6651(a) | Sec. 6653(a) | Sec. 6653(b) |
1977 | 0 | 0 | 0 | 0 |
1978 | $ 1,523 | 0 | $ 76.15 | 0 |
1979 | 0 | 0 | 0 | 0 |
1980 | 0 | 0 | 0 | 0 |
Pursuant to the parties' agreement, decisions were entered in both dockets on March 19, 1987. Upon petitioners' motion for litigation costs, these decisions were vacated and filed as supplemental stipulations.
90 T.C. 702">*704 The deficiency determined for 1977 related to the proper taxpayer to recognize gain from the sale of certain stock. On December 29, 1976, 1988 U.S. Tax Ct. LEXIS 46">*49 Mr. Whitesell, an officer and stockholder of Williams Printing Co. (Williams), granted Williams an option to purchase Mr. Whitesell's 10,200 shares of Williams stock. On December 30, 1976, Mr. Whitesell transferred a total of 8,125 shares of this stock to his five children and to the Vultee Church of Christ. As secretary-treasurer of Williams, Mr. Whitesell signed the stock certificates that accomplished the transfer on December 31, 1976. Each certificate stated that the shares it represented were subject to the option. Petitioners filed gift tax returns reporting the transfers.
On February 11, 1977, Williams exercised its option to purchase the stock, paying a total of $ 39,794.25 to petitioners, their children, and the church. Petitioners and each of their children reported a proportionate share of the gain from this transaction. On Schedule D (Capital Gains and Losses) of their Form 1040 (Individual Income Tax Return) for 1977, petitioners reported proceeds of $ 8,105, and a long-term capital gain of $ 7,380, from a sale of "Wms." Petitioners reported total gross income of $ 49,873 for 1977.
The deficiencies determined for 1978, 1979, and 1980 involved unreported income and1988 U.S. Tax Ct. LEXIS 46">*50 deductions. Petitioners reported income, credits, and deductions on Forms 1041 (Fiduciary Income Tax Return) for the Whitesell trust and the LOV trust, which were both grantor-type trusts, rather then on their own Forms 1040. From the first appeals conference, petitioners conceded that the latter would have been the "more proper" treatment. Respondent also determined additions to tax under
Petitioners paid, or agreed to pay, their attorney $ 18,984.42 in fees and expenses, court costs, and other disbursements between December 20, 1982, and June 30, 1987, $ 16,136.76 (85 percent) of which is applicable to docket No. 9885-83. Petitioners individually incurred 90 T.C. 702">*705 $ 11,222.45 in expenses, $ 9,539.08 of which is applicable to docket No. 9885-83. 2
1988 U.S. Tax Ct. LEXIS 46">*51 Initially, we must determine in which of these cases we have the authority to award litigation costs. Respondent argues that
We agree with respondent that we may not award litigation costs in docket No. 29402-82. Absent a statutory provision, this Court does not have authority to award attorney's fees or litigation costs.
Petitioners, however, rely on
We turn now to the question of whether litigation costs should be awarded in docket No. 9885-83 involving the years 1977, 1979, and 1980.
We will begin with the question of whether respondent's position in the case was reasonable. That depends upon 90 T.C. 702">*707 whether, based on all the facts and circumstances in the case, he had reasonable positions in both law and fact; the fact that respondent loses or concedes is not necessarily determinative.
The parties are in agreement that the two significant issues for 1977 were who should be taxable on the income from the sale of the Williams stock 1988 U.S. Tax Ct. LEXIS 46">*57 to Williams, and whether the statute of limitations barred assessment when the notice of deficiency was issued. Petitioners have conceded that respondent's position on the taxability of income issue was reasonable, so only the statute of limitations issue must be considered.
Respondent contends that
We agree with respondent that his position was reasonable. The question of whether disclosure was sufficient for petitioners to have the benefit of
1988 U.S. Tax Ct. LEXIS 46">*59 Petitioners also argue that respondent's determination and pursuit of the addition to tax for fraud for 1979 and 1980 was unreasonable. We disagree. Fraud is a question of fact, to be determined from all the facts and circumstances in the record.
We do not think that respondent's offer to concede all or part of the fraud issue in appeals conferences in both offices where the case was considered indicates unreasonableness, at least where such concessions were tied to concessions1988 U.S. Tax Ct. LEXIS 46">*60 which he reasonably sought from petitioners, i.e., the taxability of income issue for 1977 (see p. 707
The fact that the burden of proof as to fraud is on the respondent does not make his position herein unreasonable. In
Nor are we persuaded that respondent's position should be held to be unreasonable because he allegedly has not determined the addition to tax for fraud in other cases involving family trusts. In the first place, we are not satisfied that this is true. See
In sum, we conclude that petitioners have not carried their burden of proof that respondent was unreasonable in 90 T.C. 702">*710 maintaining his position on the significant issues with respect to the taxable years 1977, 1979, and 1980 (docket No. 9885-83). In view of this conclusion, we need not consider the extent to which petitioners were the prevailing party or the nature of the reasonable litigation costs (see note 2,
In view of the foregoing, petitioners' motion for an award of litigation costs will be denied and decision will be entered in accordance with the supplemental stipulation1988 U.S. Tax Ct. LEXIS 46">*63 of the parties.
1. Unless otherwise noted, all section references are to the Internal Revenue Code as amended and in effect at the relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.↩
2. These expenses consist of the following items:
Item | Amount |
Air fares | $ 7,636.20 |
Hotels | 450.00 |
Food | 720.00 |
Bus, taxis | 560.00 |
Telephone charges | 1,856.25 |
3. See also
4. That subsection provides:
(1) multiple actions which could have been joined or consolidated, or (2) a case or cases involving a return or returns of the same taxpayer (including joint returns of married individuals) which could have been joined in a single proceeding in the same court,↩
5.
6. That subsection provides:
(1) brought by or against the United States in connection with the determination, collection, or refund of any tax, interest, or penalty under this title, and (2) brought in a court of the United States (including the Tax Court and the United States Claims Court),↩
7. As in effect for the year when this case was commenced, that subparagraph provided:
(A) In general. -- The term "prevailing party" means any party to any proceeding described in subsection (a) (other than the United States or any creditor of the taxpayer involved) which -- (i) establishes that the position of the United States in the civil proceeding was unreasonable, and (ii)(I) has substantially prevailed with respect to the amount in controversy, or (II) has substantially prevailed with respect to the most significant issue or set of issues presented.↩
8. Other courts, however, look to the prepetition period as well. See
9. That clause, which codified the rule in
10. We note that there were appeals conferences in two different cities because the place of trial was changed at petitioners' request.↩
11. Cf.