UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

WALTER R. RIPLEY, Donee-
Transferee of Mildred M. Ripley,
Donor; MELYNDA H. RIPLEY, Donee-
Transferee of Mildred M. Ripley,
Donor,
                                                                   No. 97-1510
Petitioners-Appellants,

v.

COMMISSIONER OF INTERNAL REVENUE,
Respondent-Appellee.

Appeal from the United States Tax Court.
(Tax Ct. No. 93-26209)

Submitted: October 28, 1997

Decided: February 20, 1998

Before ERVIN, WILKINS, and HAMILTON, Circuit Judges.

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Reversed and remanded by unpublished per curiam opinion.

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COUNSEL

G. Nelson Mackey, Jr., BRUMBERG, MACKEY & WALL, P.L.C.,
Roanoke, Virginia, for Appellants. Loretta C. Argrett, Assistant
Attorney General, David English Carmack, Regina S. Moriarty, Tax
Division, UNITED STATES DEPARTMENT OF JUSTICE, Wash-
ington, D.C., for Appellee.

_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

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OPINION

PER CURIAM:

Walter and MeLynda Ripley (the Ripleys), appeal an order of the
tax court denying their motion for attorney's fees under 26 U.S.C.
§ 7430 (1994). The issue is whether the tax court abused its discretion
by finding the Internal Revenue Service's (IRS) pre-litigation position
"substantially justified." After conducting a detailed review of the
record, we conclude that the tax court abused its discretion in finding
that the IRS had substantial justification for its position. Accordingly,
we reverse.

In 1983, Mrs. Mildred M. Ripley (Mrs. Ripley) gave the Ripleys
real property valued at $93,300. Mrs. Ripley also gifted property that
she valued at $84,139 to her other son Joseph. Mrs. Ripley filed a gift
tax return and paid the applicable tax. After review, the IRS con-
cluded that the property given to Joseph was worth significantly more
than reported by Mrs. Ripley. Negotiations between Mrs. Ripley and
the IRS resulted in an agreement extending the time in which the IRS
could assess additional tax1 and establishing Mrs. Ripley's tax liabil-
ity at $239,124. The IRS assessed the additional tax against Mrs. Rip-
ley on April 7, 1992.

For reasons unknown, Mrs. Ripley failed to pay the assessed tax.
Accordingly, on September 17, 1993, the IRS notified the Ripleys
that they were liable for $93,300 in tax, plus interest, because donees
are liable for unpaid gift tax to the extent of the value of the gift.2 The
Ripleys petitioned the tax court, contending that the one-year period
of limitations for assessment of transferee liability had expired.3 How-
ever, the tax court found the notices of transferee liability timely and
that the Ripleys were liable for the tax.
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1 See I.R.C. § 6501(c)(4).
2 See I.R.C. § 6324(b);Poinier v. Commissioner, 

, 920 (3d
Cir. 1988).

3 See I.R.C. § 6901(c)(1).

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On appeal, this court disagreed and found that the Form 872 that
Mrs. Ripley signed to extend the period of assessment controlled the
running of the one-year statute of limitations during which the IRS
must notify a donee of transferee liability under§ 6901(c).4 After the
time for appeal expired, the Ripleys moved for attorney's fees pursu-
ant to § 7430. They claimed that, as a "prevailing party," they were
entitled to attorney's fees because the pre-litigation position of the
IRS was unreasonable and not "substantially justified." The tax court
denied the motion and found that its acceptance of the IRS's analysis
and arguments in the matter made the IRS's position reasonable and
"substantially justified." The Ripleys appeal the order denying their
motion for attorney's fees, and we review the tax court's denial of
fees and expenses for an abuse of discretion.5

The IRS cannot be substantially justified in ignoring the plain
meaning of the language of its own forms. "Substantially justified"
under § 7430(c)(4) represents a position "that is, justified to a degree
that could satisfy a reasonable person" or having a "reasonable basis
in both law and fact."6 The IRS drafted and prepared the agreement,
which Mrs. Ripley signed, and then the IRS refused to comply with
all the terms of the agreement. With the authority to subject a citizen
to litigation comes the responsibility to be careful; thus, it is unrea-
sonable for the IRS to offer an agreement that it does not intend to
follow. Therefore, we reverse the denial of the Ripleys' motion for
attorney's fees and other expenses and remand to the tax court to
determine the Ripleys' reasonable attorney's fees and costs. We dis-
pense with oral argument because the facts and legal contentions are
adequately presented in the materials before the court and argument
would not aid the decisional process.

REVERSED AND REMANDED
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4 See Ripley v. Commissioner, 

(4th Cir. 1996).

5 See Pierce v. Underwood, 

, 557-63 (1988).

6 See 

justified" under the Equal
Access to Justice Act); see also United States v. Paisley, 

,
1165 (4th Cir. 1992).

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