1987 U.S. Tax Ct. LEXIS 26">*26
In
88 T.C. 516">*516 OPINION
Respondent determined deficiencies in Federal gift tax against petitioners for the calendar quarter ended September 30, 1981, in the following1987 U.S. Tax Ct. LEXIS 26">*27 amounts:
Docket No. | Petitioner | Deficiency |
3146-85 | Victor I. Minahan | $ 882,737.74 |
3147-85 | Marilee Minahan | 882,737.93 |
3148-85 | Estate of Mary M. Walter, deceased, | |
the Marine Trust Co., N.A., | ||
personal representative | 1,796,800.32 | |
3203-85 | Estate of John B. Torinus, deceased, | |
the Kellogg Citizens National | ||
Bank and Louise B. Torinus, | ||
co-personal representatives | 592,747.86 | |
3204-85 | Roger C. Minahan | 549,888.83 |
3205-85 | Louise B. Torinus | 589,725.25 |
88 T.C. 516">*517 The cases were called from the calendar for trial on March 17, 1986, at which time respondent submitted on behalf of the parties a stipulated decision in each case. Pursuant to these stipulated decisions, the parties agreed that no deficiencies in Federal gift tax are due from, or overpayments due to, petitioners for the calendar quarter ended September 30, 1981. Petitioners thereafter moved this Court to award litigation costs pursuant to
1987 U.S. Tax Ct. LEXIS 26">*28 In
The relevant background findings appear in our opinion in
Respondent states that he "does not agree that amount of costs claimed are reasonable." Furthermore, respondent's response to petitioners' motion implies, without specific argument, that the actual time billed for the services of petitioner Roger C. Minahan (hereinafter sometimes referred to as attorney Minahan) and allocable to his own case are not allowable as litigation costs.
(1) Reasonable litigation costs. (A) In general. -- The term "reasonable litigation costs" includes -- (i) reasonable court costs, (ii) the reasonable expenses of expert witnesses in connection with the civil proceeding, (iii) the reasonable1987 U.S. Tax Ct. LEXIS 26">*29 cost of any study, analysis, engineering report, test, or project which is found by the court to be necessary for the preparation of the party's case, and (iv) reasonable fees paid or incurred for the services of attorneys in connection with the civil proceeding.
We have previously determined that
It is evident that, in the aggregate, petitioners have incurred and paid substantially more in litigation costs than the maximum amount that we may award (see table 1 in
We determine that petitioners, other than attorney1987 U.S. Tax Ct. LEXIS 26">*31 Minahan, have met their burden of proof that such fees, subject to the limitations and determinations herein, are reasonable litigation costs within
Attorney Minahan is counsel in the instant case and also is a senior stockholder and president of the law firm. The record indicates that attorney Minahan spent 102 3/4 hours in the matter before the Court, which was billed to petitioners at his prevailing rate of $ 150 per hour. By agreement between the law firm and petitioners, attorney Minahan agreed to be responsible for 11.8 percent of the law firm's monthly bills, determined at the law firm's prevailing rates. The firm spent an aggregate of 386 hours accumulated by eight of the law firm's attorneys. Attorney Minahan has rendered payment to the law firm regarding his proportionate shares of legal expenses.
88 T.C. 516">*519 We recently held that a pro se attorney1987 U.S. Tax Ct. LEXIS 26">*32 may not recover fees for the value of his own services, as lost opportunity costs are not fees paid or incurred for the service of an attorney within the meaning of
Because petitioners' aggregate attorney's fees are so great that the aggregate otherwise allowable litigation costs substantially exceed the $ 25,000 "cap", the result of disallowing an award of attorney's fees to attorney Minahan is to, in effect, reallocate the disallowed amount among the five other petitioners. This reallocation is to be in the same proportion as the proportionate interests set forth in table 1 in
Based on the foregoing determination, we award judgments of reasonable litigation costs as shown in the following table: 88 T.C. 516">*520
Petitioner | Sec. 7430 award |
Victor I. Minahan, docket No. 3146-85 and Marilee | |
Minahan, docket No. 3147-85 | $ 9,052.14 |
Estate of Mary M. Walter, docket No. 3148-85 | 7,919.50 |
Estate of John B. Torinus, docket No. 3203-85 and | |
Louise B. Torinus, docket No. 3205-85 | 6,788.36 |
Roger C. Minahan, docket No. 3204-85 | 5 1,240.00 |
25,000.00 |
Simpson,
In
In some situations, it may be difficult to trace legal fees and to determine the portion which is not returned to the petitioner. Nevertheless, I believe that we should keep open the possibility of a petitioner's showing that the legal fees were not returned to him. By this opinion, I do not mean to indicate that I would necessarily allow a recovery in such situation; I merely wish to await the day of that case to decide that issue.
Whitaker,
Here, however, the two tests of
The majority in this case has created a third condition for an award of attorney's fees -- that the petitioner-attorney1987 U.S. Tax Ct. LEXIS 26">*38 must not hold "an equity interest" in the law firm rendering the services. The majority boldly states that in this circumstance the fee is not a fee but a payment to the attorney-petitioner. There is, however, no finding of fact supporting this conclusion. This judicial legislation by the majority is without justification.
Korner, Cohen, Clapp, Jacobs, Williams, and Wells,
Williams,
Because the statutory limit is exceeded, a petitioner may recover only a proportionate share of his recoverable litigation costs. 1 The majority has allocated a disproportionately larger share of the $ 25,000 limit to Attorney Minahan. Attorney Minahan is awarded $ 1,240 -- 100 percent of his reimbursable share of litigation costs (as determined by the majority). The other petitioners, however, are awarded1987 U.S. Tax Ct. LEXIS 26">*39 less 88 T.C. 516">*523 than 100 percent of their recoverable costs. Attorney Minahan should be entitled to recover no greater percentage of his reimbursable costs than any other petitioner.
Each petitioner's recovery should be determined as follows:
Individual petitioner's recoverable costs X $ 25,000 2 /Total recoverable costs
The majority, however, cannot possibly know what each petitioner's proper proportion is because they do not know what the petitioners' total recoverable costs are. Consequently, any allocation they make is manifestly arbitrary.
1. Pursuant to sec. 7430(d), the Court has determined that the cases of the following petitioners could have been joined or consolidated and so these cases shall be treated as one civil proceeding for purposes of applying sec. 7430: Marilee Minahan, docket No. 3147-85; Estate of Mary M. Walter, Deceased, The Marine Trust Company, N.A., Personal Representative, docket No. 3148-85; Estate of John B. Torinus, Deceased, The Kellogg Citizens National Bank and Louise B. Torinus, Co-Personal Representatives, docket No. 3203-85; Roger C. Minahan, docket No. 3204-85; and Louise B. Torinus, docket No. 3205-85.
Unless indicated otherwise, all section references are to sections of the Internal Revenue Code of 1954 as in effect for the period in issue.↩
2. Unless indicated otherwise, all Rule references are to the Tax Court Rules of Practice and Procedure.↩
3. Clauses (ii), (iii), and (iv) of
4. This limitation has been removed by sec. 1551(a) of the Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2085, 2752, but the change was made effective for civil actions or proceedings commencing after Dec. 31, 1985, and so does not affect the instant cases.↩
5. The
Sec. 7430(c)(1)(A)(iii) - expert appraisal fee | $ 1,180 |
Sec. 7430(c)(1)(A)(i) - Tax Court petition cost | 60 |
1,240 |
1. I note that
1. The calculation of the proportion of the allocation of an award among several petitioners pursuant to
2. This amount represents the statutory limit.