122 T.C. No. 3



                    UNITED STATES TAX COURT



  FLORIDA COUNTRY CLUBS, INC., A FLORIDA CORPORATION, SUNCOAST
COUNTRY CLUBS, INC., A FLORIDA CORPORATION, DEBORAH A. HAMILTON,
               AND JAMES R. MIKES, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



    Docket No. 9160-02.             Filed February 3, 2004.



         Petitioners (Ps), two S corporations and two
    shareholders of those corporations, received letters of
    proposed deficiency with respect to their 1993 and 1994
    Federal income tax returns, which allowed Ps an
    opportunity for administrative review in Respondent’s
    (R) Appeals Office. After Ps protested the proposed
    deficiencies with the Appeals Office, the parties
    settled without R’s issuing either an Appeals Office
    notice of decision or a notice of deficiency.

         Ps filed a petition with this Court under sec.
    7430(f), I.R.C., and Rule 271, Tax Court Rules of
    Practice and Procedure, for reasonable administrative
    costs. R moved for a summary judgment that Ps are not
    entitled to an award of administrative costs as a
    matter of law.
                               - 2 -

          1. Held: R never took a position in the
     administrative proceeding as provided by sec.
     7430(c)(7)(B), I.R.C., because Ps never received a
     notice of decision from the Appeals Office and R never
     sent Ps a notice of deficiency. Consequently, Ps do
     not qualify as prevailing parties under sec.
     7430(c)(4), I.R.C.

          2. Held, further, the meaning of term “notice of
     deficiency” under sec. 7430(c)(7), I.R.C., is the same
     as its meaning under sec. 6212(a), I.R.C.

          3. Held, further, the proposed notice of
     deficiency that was never approved and never sent to Ps
     is not a notice of deficiency for purposes of sec.
     7430(c)(7), I.R.C.



     James R. Mikes, for petitioners.

     Michael D. Zima, for respondent.



                              OPINION


     KROUPA, Judge:   This matter is before the Court on

respondent’s motion for summary judgment under Rule 121.1   The

sole issue for decision is whether petitioners are entitled to

reasonable administrative costs under section 7430 for expenses

incurred in proceedings within the Internal Revenue Service (IRS)

regarding their 1993 and 1994 Federal income taxes.   For the




     1
       Unless otherwise indicated, all Rule references are to the
Tax Court Rules of Practice and Procedure, and all section,
chapter, and subtitle references are to the Internal Revenue
Code.
                                 - 3 -

reasons explained below, we find that petitioners are not

entitled to administrative costs.

                              Background

         Petitioners are James R. Mikes (Mikes), Deborah A. Hamilton

(Hamilton), Florida Country Clubs, Inc. (FCC), and Suncoast

Country Clubs, Inc. (SCC).    FCC and SCC are corporations that

elected to be taxed under subchapter S for 1993, 1994, and 1995.

Mikes and Hamilton were married and filed joint returns for those

years, and they were shareholders of the corporations.2

     Respondent commenced an audit of FCC for the years 1993 and

1994 in December 1995, to examine, inter alia, certain claimed

depreciation expenses and a possible understatement of gross

receipts.     In 1996 respondent expanded the audit for those years

to include Mikes, Hamilton, and SCC.       The audit encompassed, in

addition to the depreciation deductions, the deductibility of net

operating losses as well as interest income and expenses claimed

by petitioners on account of certain loans.      In May 1999, the

audit was further widened to include the year 1995 for all

petitioners.

     On September 23, 1997, respondent sent petitioner FCC a 30-

day letter proposing to increase the income reported on its 1993

and 1994 returns in the amounts of $1,168,554 and $44,219,


     2
       At the time the petition was filed, petitioners Hamilton
and Mikes resided in Florida and the principal place of business
of the corporate petitioners, FCC and SCC, was also in Florida.
                               - 4 -

respectively.   On October 3, 1997, 30-day letters were sent to

SCC, Mikes, and Hamilton.   The letters proposed to increase

Mikes’s and Hamilton’s income for 1993 and 1994 by the amounts of

$2,680,313 and $2,253,256 respectively and to increase the income

of SCC by $272,840 for 1993 and $74,426 for 1994.   Those proposed

changes would have resulted in deficiencies for Mikes and

Hamilton of $398,101 for 1993 and $130,892 for 1994.

     On March 27, 1998, a reviewer in respondent’s Quality

Measurement Staff submitted a proposed notice of deficiency (the

reviewer’s proposal) with respect to the 1993 and 1994 Federal

income tax returns of Mikes and Hamilton.   The reviewer’s

proposal was to be reviewed by the Office of District Counsel

(District Counsel) in Jacksonville, Florida.   The reviewer’s

proposal recommended an increase in the income reported on the

1993 and 1994 returns of FCC and SCC and also proposed increases

to the income reported on the 1993 and 1994 returns of Mikes and

Hamilton in the amounts of $2,698,549 and $2,300,647,

respectively.

     On May 29, 1998, District Counsel rejected the reviewer’s

proposal and advised her to obtain petitioners’ agreement to

extend the statutory period of limitations for assessment, which

would allow the staff time to further explore the facts of the

case.   Petitioners consented to extend the statutory period of

limitations until June 30, 1999.   Consequently, respondent did
                               - 5 -

not send petitioners any notice of deficiency, nor did respondent

issue the reviewer’s proposal to petitioners.

     During 1998 and 1999, respondent issued to each petitioner

at least three revised 30-day letters proposing adjustments to

their 1993 and 1994 reported income.   Upon receipt of the final

30-day letters, petitioners protested the proposed adjustments to

respondent’s Appeals Office.

     The parties settled the case sometime in April 2000, without

respondent issuing either a notice of deficiency or an Appeals

Office notice of decision.   Pursuant to the settlement, the

parties agreed that petitioners owed no additional taxes for

either 1993 or 1994 and in fact were entitled to a refund for

1995.

     Petitioners filed a request for administrative costs under

section 7430 with respondent, and respondent denied their request

on February 28, 2002.   Consequently, petitioners timely filed

their petition with this Court on May 29, 2002, under section

7430(f) and Rule 271, for administrative costs they incurred

after January 18, 1999.3

     On May 27, 2003, respondent filed a motion for summary

judgment claiming that petitioners were not entitled, as a matter



     3
       Jan. 18, 1999, is the effective date for the amendments to
sec. 7430(c)(2) under the Internal Revenue Service Restructuring
and Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3101(b),
112 Stat. 728.
                               - 6 -

of law, to recover administrative costs because respondent never

took a “position” in the proceedings.

     Summary judgment is intended to expedite litigation and

avoid unnecessary and expensive trials.    Fla. Peach Corp. v.

Commissioner, 

, 681 (1988).    Summary judgment may be

granted where there is no genuine issue of any material fact and

a decision may be rendered as a matter of law.   Rule 121(a) and

(b); see Sundstrand Corp. v. Commissioner, 

, 520

(1992), affd. 

 (7th Cir. 1994); Zaentz v.

Commissioner, 

, 754 (1988).    The moving party bears

the burden of proving that there is no genuine issue of material

fact, and factual inferences will be read in a manner most

favorable to the party opposing summary judgment.    Dahlstrom v.

Commissioner, 

, 821 (1985); Jacklin v. Commissioner,

, 344 (1982).   When a motion for summary judgment is

made and properly supported, the adverse party may not rest upon

mere allegations or denials of the pleadings but must set forth

specific facts showing that there is a genuine issue for trial.

Rule 121(d).   We conclude that there is no genuine issue of

material fact precluding us from resolving the question raised in

respondent's motion.4




     4
       No hearing was requested, and none is required. Rule
232(a). We therefore dispose of the petition without a hearing
or further written submissions.
                                - 7 -

                             Discussion

     Section 7430 has been amended several times since it was

enacted in 1982.5   Which provisions (and therefore which

amendments) apply in a given case depends on when the proceeding

was commenced and the period within which the claimed costs were

incurred.   Because this proceeding was commenced on May 29, 2002,

and the costs were incurred after January 18, 1999, the

amendments to section 7430(c)(2) made by the Internal Revenue

Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L.

105-206, sec. 3101(b), 112 Stat. 727 apply.   In addition, we are

asked to interpret the amendment in 1996 to section 7430(c)(4)

made by the Taxpayer Bill of Rights 2 (TBOR 2), Pub. L. 104-168,

secs. 701-704, 110 Stat. 1463-1464.

     We begin by discussing the general, operative provisions of

section 7430, then discuss the amendments made in TBOR 2 and RRA

1998.    We then analyze the arguments each party made, and we

conclude that petitioners cannot recover administrative costs.




     5
       Sec. 7430 was enacted in 1982 to allow certain prevailing
parties to recover reasonable litigation costs (but not
administrative costs) in cases brought by or against the United
States to determine, collect, or refund any tax, interest, or
penalty. The Tax Equity and Fiscal Responsibility Act of 1982,
Pub. L. 97-248, sec. 292(a), 96 Stat. 572. Sec. 7430 was
expanded in 1988 to allow for the recovery of reasonable
administrative costs. The Technical and Miscellaneous Revenue
Act of 1988 (TAMRA), Pub. L. 100-647, sec. 6239(a), 102 Stat.
3743-3746.
                                      - 8 -

I.   Section 7430

     Recovery of administrative costs is governed by section

7430(a), which permits a taxpayer who is a “prevailing party” in

any administrative proceedings brought by or against the United

States to recover reasonable administrative costs incurred by him

or her in connection with such proceedings.           See sec. 7430(a)(1).

To be a “prevailing party”, the taxpayer must, inter alia,

substantially prevail with respect to the amount in controversy

or the most significant issue or set of issues presented.          Sec.

7430(c)(4)(A).6      A taxpayer will not qualify as a prevailing


     6
         SEC. 7430(c) provides in part:

         (4)   Prevailing party.--

          (A) In general.–-The term “prevailing party”
     means any party in any proceeding to which
     subsection (a) applies (other than the United
     States or any creditor of the taxpayer involved)--

                    (i) which–-

                         (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, and

                      *    *      *    *      *   *     *

          (B) Exception If United States Establishes That Its
     Position Was Substantially Justified.--

                    (i) General Rule.–-A party shall not be treated as
               the prevailing party in a proceeding to which
               subsection (a) applies if the United States establishes
                                                        (continued...)
                                - 9 -

party, however, if the Government establishes that “the position

of the United States” was substantially justified.   See sec.

7430(c)(4)(B).    The “position of the United States” is, in turn,

defined in section 7430(c)(7) as the position taken by the

Government in an administrative proceeding as of the earlier of:

(1) The date of receipt by the taxpayer of the notice of decision

of the Appeals Office, or (2) the date of the notice of

deficiency.   Thus, prior to the issuance of a notice of

deficiency or an Appeals Office decision, the Government is not

considered as having taken any position.   See, e.g., Richardson

v. Commissioner, T.C. Memo. 1991-427 (“we cannot consider the

conduct of the revenue agent prior to * * *   [date of notice of

deficiency].”);    Nathaniel v. United States, 69 AFTR 2d 456, 92-1

USTC par. 50,023 (E.D. Cal. 1991) ("The plain language of section

7430(c)(7) precludes the court from considering the position

taken by the United States in the administrative proceedings * *

* [prior to] the date of a notice of deficiency or the date of

the receipt by the taxpayer of a notice of a decision of the

Office of Appeals").

     Respondent argues that because no notice of deficiency or

Appeals Office decision was ever issued to petitioners, no

“position of the United States” had been taken that can be shown


     6
      (...continued)
          that the position of the United States in the
          proceeding was substantially justified.
                                 - 10 -

to be substantially justified under section 7430(c)(4)(B).

Accordingly, respondent contends, petitioners cannot qualify as a

prevailing party under section 7430(c)(4) and cannot therefore

recover administrative costs.

     Respondent’s contention presupposes, of course, that before

a taxpayer can qualify as a “prevailing party” under section

7430(c)(4), the Government must take a position as defined in

section 7430(c)(7), i.e., issue a notice of deficiency or an

Appeals Office decision.      This is the first time we are asked to

determine this issue since section 7430(c)(4) was amended by TBOR

2 in 1996, and we turn to it now.

     A.      Pre TBOR 2 Section 7430(c)(4)

     Prior to the TBOR 2 amendment to section 7430(c)(4), the

taxpayer had to substantially prevail and, in addition, had the

burden of establishing that the “position of the United States”

in the proceedings was not substantially justified.7     If the


     7
        Prior to the TBOR 2 amendment, sec. 7430(c)(4) read, in
relevant part, as follows:

         SEC. 7430(c)(4).   Prevailing Party.--

          (A) In General.–-The term “prevailing party”
     means any party in any proceeding to which
     subsection (a) applies (other than the United
     States or any creditor of the taxpayer involved)--

                  (i) which establishes that the position of the
             United States in the proceeding was not substantially
             justified,

                                                       (continued...)
                              - 11 -

Government had not taken a position as defined in section

7430(c)(7), the taxpayer could not meet his or her burden of

showing that such position was not substantially justified and

could not recover administrative costs.   See Ball v.

Commissioner, T.C. Memo. 1995-520 (noting that section 7430(c)(7)

“does not allow an award of administrative costs for a position

* * * [the Commissioner] takes before * * * [the Commissioner]

issues the notice of deficiency or Appeals issues a notice of

decision”); In re ACME Music Co., 208 Bankr. 838, 842 n.3 (Bankr.

W.D. Pa. 1997) (“until * * * [an Appeals Office decision] is

received by a taxpayer or a deficiency notice is issued, the

I.R.S. does not take any position in an administrative proceeding

and administrative costs cannot be recovered in any event”).

     B.   TBOR 2 Amendment to Section 7430(c)(4)

     Congress amended section 7430(c)(4) in TBOR 2 to shift to

the Government the burden of establishing that its position was

substantially justified.   Congress shifted the burden by amending

section 7430(c)(4)(B) to provide that a taxpayer cannot be a

prevailing party if the Government demonstrates that its position


     7
      (...continued)
               (ii) which--

                    (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, and * * *
                               - 12 -

was substantially justified.   In doing so, it eliminated any

direct reference to the “position of the United States” in

section 7430(c)(4)(A).   In its current form, therefore, the

language of section 7430(c)(4)(A) only requires that the taxpayer

show that he or she substantially prevailed.8   Although the

language of section 7430(c)(4)(A) no longer mentions the

“position of the United States”, we interpret the section to

require that such a position be taken before a taxpayer can

qualify as a prevailing party.

     We interpret the language of section 7430(c)(4) by examining

all subsections of section 7430.   It is a central tenet of

statutory construction that, when interpreting any one provision

of a statute, the entire statute must be considered.   See, e.g.,

Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 

, 36 (1998); Huffman v. Commissioner, 

, 1145 (9th

Cir. 1992) (The guiding principle in analyzing the plain meaning

of section 7430 is that the entire statute must be examined as a

whole, with all of its sections and subsections in mind), affg.

T.C. Memo. 1991-144.   We turn now to analyzing section

7430(c)(4).




     8
       In order to be a “prevailing party,” a taxpayer must also
satisfy certain net worth requirements. See sec.
7430(c)(4)(A)(ii). The net worth requirements are not at issue,
however, in this motion for summary judgment action.
                               - 13 -

     Subparagraphs (A) and (B) of section 7430(c)(4) together set

forth circumstances in which a taxpayer is allowed to recover

administrative costs.   Under subparagraph (A), a taxpayer who

substantially prevails with respect to the amount in controversy

or issues presented will be a prevailing party unless the

Government shows, under subparagraph (B), that its position was

substantially justified.   Subparagraph (B) of section 7430(c)(4)

is not independent from subparagraph (A) but is instead a

condition on which the recovery of administrative costs depends.

If the Government establishes that its “position” was

substantially justified, the taxpayer cannot be a prevailing

party.    Thus, even though the TBOR 2 amendment removed any direct

reference to the term “position” in section 7430(c)(4)(A), there

still must be an analysis of whether the Government has taken a

position as that term is defined in subsection (c)(7) in

evaluating whether a taxpayer is a prevailing party under

subsection (c)(4).

     Indeed, any contrary construction–-that a “position” as

defined in section 7430(c)(7) is not necessary for a taxpayer to

qualify as a “prevailing party”–-would run contrary to the

purpose behind the TBOR 2 amendment.    If no “position” is

required, taxpayers would always qualify as prevailing parties

before a notice of deficiency or Appeals Office decision had been

issued.   This would result from the Government’s inability to
                              - 14 -

show that the stance it had taken in the proceedings was

substantially justified because it would not be considered to

have taken a “position” under section 7430(c)(7).    Taxpayers

would therefore be able to recover administrative costs incurred

before the issuance of a notice of deficiency or Appeals Office

decision, whether or not the Government’s position was

substantially justified.   There is no indication that the TBOR 2

amendment was designed to have such an effect.

     The TBOR 2 amendment sought to shift to the Government the

“burden of proof to establish that it was substantially justified

in maintaining its position against the taxpayer.”    H. Rept.

104-506, at 37 (1996), 1996-3 C.B. 49, 85.   There is no

indication that the amendment was intended, in addition to

shifting the burden to the Government, to prevent the Government

from showing that its position was substantially justified.

     Likewise, nothing in the legislative history to TBOR 2

suggests that the amendment to section 7430(c)(4)(A) was intended

to alter the effect of section 7430(c)(7).   We have previously

found that the effect of subsection (c)(7) is to “protect the

Commissioner from claims by taxpayers that positions taken by,

for example, the Examination or Collections Division personnel,

before issuance of a notice of deficiency or of the decision of

Appeals, are not substantially justified.”   Ball v. Commissioner,
                               - 15 -

supra.9    The TBOR 2 amendment to section 7430(c)(4) is consistent

with the congressional intent of immunizing the Government

against claims for costs until the IRS’s position has

crystallized in an Appeals Office decision or notice of

deficiency.

II.   The Parties’ Arguments

      Respondent maintains that since no Appeals Office decision

or notice of deficiency was ever issued to petitioners,

petitioners do not qualify as “prevailing parties” for purposes

of section 7430(c)(4) and cannot recover administrative costs.10

In response, petitioners assert that respondent did take a

“position”.    Respondent’s position was manifested in:   (1) The


      9
       Sec. 7430(c)(7) serves to protect the IRS from liability
before the Appeals Office gets involved. The Appeals Office is
the forum for the compromise of disputes between taxpayers and
the IRS, and it is the first stage within the IRS at which the
proposed adjustments are fully reviewed and which expressly takes
into account the hazards of litigation.
      10
        We disagree with respondent that Estate of Gillespie v.
Commissioner, 

 (1994), and Belshee v. Commissioner,
T.C. Memo. 1999-380, establish that petitioners are not entitled
to recover costs prior to the issuance of a notice of deficiency
or an Appeals Office decision. These cases denied the taxpayers’
requests to recover costs on the grounds that such costs were not
incurred during a period for which recovery was permitted under
sec. 7430(c)(2). These cases did not address whether the
taxpayers were prevailing parties under subsec. (c)(4).
Furthermore, these cases were decided on the basis of sec.
7430(c)(2) before it was amended by RRA 1998 to allow taxpayers
to recover costs incurred on or after the date of mailing of the
first letter of proposed deficiency. Because we interpret sec.
7430(c)(2) in light of its amendment by RRA 1998, the logic of
Estate of Gillespie and Belshee is not dispositive of whether
petitioners are entitled to recover administrative costs.
                                - 16 -

30-day letters sent to petitioners during September and October

of 1997;11 and (2) the reviewer’s proposal, dated March 27, 1998.

     A.   The Initial 30-Day Letters

     Although petitioners acknowledge respondent issued 30-day

letters to them during September and October of 1997, petitioners

fail to develop this theory or make any comprehensible argument

regarding the 30-day letters.    Congress amended section 7430(c)

in RRA 1998 to incorporate 30-day letters.      We now address

whether our conclusion that administrative costs are not

recoverable unless the Government takes a “position” either in a

notice of deficiency or an Appeals Office decision is at odds

with the RRA 1998 amendment to section 7430(c).

     In RRA 1998, Congress amended section 7430(c)(2), which

defines the term “reasonable administrative costs”, to include

costs incurred from the “the date on which the 1st letter of

proposed deficiency [the 30-day letter] which allows the taxpayer

an opportunity for administrative review in the Internal Revenue

Service Office of Appeals is sent.”      Sec. 7430(c)(2).   Prior to

the RRA 1998 amendment, “reasonable administrative costs” were

limited to those incurred after the date of the notice of

deficiency or Appeals Office decision (i.e., the same instances



     11
       Petitioners’ arguments with respect to the 30-day letter
are confusing and incomprehensible. Because 30-day letters were
issued in this case, we take this opportunity to address the
amendment RRA 1998 made to sec. 7430(c)(2).
                              - 17 -

in which the Government is defined as having taken a position

under section 7430(c)(7)).   The RRA 1998 amendment, therefore,

expanded the definition of “reasonable administrative costs” to

include costs incurred from an earlier date.   While the RRA 1998

amendment moves the point in time in which administrative costs

come within section 7430(c)(2), the RRA 1998 amendment does not

move the point in time in which the Government is considered to

have taken a position in section 7430(c)(7).   Accordingly, the

RRA 1998 amendment does not permit recovery of administrative

costs in situations where no notice of deficiency or Appeals

Office decision has been issued.

     Our interpretation of the RRA 1998 amendment to section

7430(c)(2) is consistent with section 7430(c)(4).   First,

paragraphs (4) and (2) of subsection (c) serve different

functions in the statutory scheme governing the recovery of

administrative costs.   Section 7430(c)(4) governs the

determination of whether a taxpayer is a prevailing party

entitled to recover administrative costs.   Section 7430(c)(2), on

the other hand, defines what costs are recoverable by a taxpayer

who otherwise qualifies as a prevailing party under section

7430(c)(4).   Stated simply, if a taxpayer does not qualify as a

prevailing party (e.g., because the Government never took a

“position” under 7430(c)(7) by issuing a notice of deficiency or

Appeals Office decision), he or she cannot recover any
                              - 18 -

administrative costs, regardless of when such costs were

incurred.

     Further, while the legislative history to the RRA 1998

amendment contains language that may be interpreted to include

the 30-day letter among the instances in which the Government

will be considered to have taken a “position”, such an

interpretation is inconsistent with the plain language of section

7430(c)(7).   In addition, such an interpretation is contrary to

congressional action taken during the legislative process in

enacting the RRA 1998 amendment to section 7430.

     The House and Senate reports accompanying the RRA 1998

amendment to section 7430 contain the following language:

          The Committee believes that taxpayers should be
     allowed to recover the reasonable administrative costs
     they incur where the IRS takes a position against the
     taxpayer that is not substantially justified, beginning
     at the time that the IRS establishes its initial
     position by issuing [the 30-day letter] * * *. S.
     Rept. 105-174 at 47 (1998), 1998-3 C.B. at 537, 583; H.
     Rept. 105-134 (1997), 1998-3 C.B. 373, 430.

     This legislative history can be read as extending the period

for accrual of recoverable costs under section 7430(c)(2) to the

date on which the 30-day letter is sent.   This legislative

history cannot be as easily read as indicating Congress’s intent

to alter the time at which the Government is considered to have

taken a section 7430(c)(7) “position” for purposes of section

7430(c)(4).   Indeed, the Statement of Managers (Conference

Report) to the RRA 1998 amendment to section 7430 merely states
                                - 19 -

that the bill “[m]oves the point in time after which reasonable

administrative costs can be awarded to the date on which the

* * * [30-day letter] is sent”.    H. Conf. Rept. 105-599, at 243

(1998), 1998-3 C.B. 747, 997.

     Any interpretation that the 30-day letter constitutes a

“position” of the Government conflicts with the plain language of

section 7430(c)(7).   The language of section 7430(c)(7) does not

include the 30-day letter among the instances in which the

Government is considered to have taken a “position”.    Rather, the

“position” of the Government is defined as that taken in the

notice of deficiency or Appeals Office decision.    It is an

established rule of statutory construction that where there is a

conflict between portions of the legislative history and the

words of the statute, the language in the statute controls.      In

re Sinclair, 

, 1341 (7th Cir. 1989).    The words

Congress chooses to put in the statute “represent the

constitutionally approved method of communication.”     Kaiser Steel

Corp. v. Pearl Brewing Co., 

, 1241 (10th Cir. 1991);

Lenz v. Commissioner, 

, 268 (1993).     “[U]nequivocal

evidence” of legislative purpose reflected in the legislative

history is required “to override the ordinary meaning of the

statute.” Kaiser Steel Corp. v. Pearl Brewing Co., supra at 1241.

In this case, not only is “unequivocal evidence” in support of

reading the 30-day letter into subsection (c)(7) clearly absent,
                              - 20 -

but several factors support the opposite conclusion–-Congress

specifically rejected adding the 30-day letter to the instances

in which the Government is considered to have taken a position.

     The first factor we rely upon to find that Congress

specifically rejected adding the 30-day letter to the definition

of “position” in section 7430 is that Congress failed to amend

subsection (c)(7) in RRA 1998 even though Congress amended

subsection (c)(2) to include within the definition of “reasonable

administrative costs” those costs incurred on or after the date

on which the 30-day letter is sent. “Where language is included

in one section of a statute but omitted in another section of the

same statute, it is generaly presumed that the disparate

inclusion and exclusion was done intentionally and purposely.”

United States v. Lamere, 

, 513 (8th Cir. 1992); see

also 2B Singer, Sutherland Statutory Construction, sec. 51.02, at

122-123 (5th ed. 1992).   More substantial evidence exists here to

persuade us that we cannot attribute Congress’ failure to amend

subsection (c)(7) to mere congressional inadvertence or

oversight.

     First, the original version of the RRA 199812 amendment to

section 7430 included an amendment to subsection (c)(7) that

mirrored that of subsection (c)(2).    This proposed amendment


     12
       RRA 1998 was originally introduced as the Internal
Revenue Service Restructuring and Reform Act of 1997. H.R. 2292,
105th Cong., 1st Sess. (1997).
                               - 21 -

would have added the issuance of the 30-day letter to the

instances in which the Government is defined as having taken a

“position”.   See H.R. 2292, sec. 301(B), 105th Cong., 1st Sess.

(1997); S. 1096, sec. 301(B), 105th Cong., 1st Sess. (1997).

This proposed amendment to subsection (c)(7) never became law,

however.   It was omitted from subsequent versions of the bill.

     In instances such as this, where language is included in an

earlier version of a bill but is deleted prior to enactment, we

may presume that the deletion was intentional.     See Keene Corp.

v. United States, 

, 208 (1993); Russello v. United

States, 

, 23-24 (1983).      At a minimum, the attempt to

amend subsection (c)(7) demonstrates that Congress was aware of

this provision, but chose not to amend it.

     Further, Congress received testimony from both the

Administration and the private sector during congressional

hearings on the RRA 1998 amendment to section 7430.     See

testimony of Donald Lubick, Assistant Secretary of Treasury (Tax

Policy), Hearings on H.R. 2292, 105th Cong., 1st. Sess. (Sept.

26, 1997).    The American Bar Association (Tax Section)

specifically requested that Congress amend section 7430(c)(7) to

add the 30-day letter to the situations in which the Government

is defined as having taken a position.     See testimony of Pamela

F. Olson, Vice Chair, Committee Operations, Section of Taxation,

American Bar Association, Hearings on H.R. 2292, 105th Cong., 1st
                              - 22 -

Sess. (Sept. 26, 1997), reprinted in 97 TNT 188-76   (“We

recommend that Congress also amend the definition of ‘position of

the United States’ * * * [to refer] to the date of the issuance

of the first notice of proposed deficiency”).   Despite having the

specific fact called to Congress’s attention, Congress passed the

RRA 1998 legislation without making any conforming amendment to

section 7430(c)(7).

     Moreover, we are mindful that the RRA 1998 amendment to

section 7430 is not the first time Congress rejected adding the

30-day letter to section 7430(c)(7).   The first time Congress

rejected adding the 30-day letter to section 7430(c)(7) was in

TAMRA in 1988.   The Senate amendment in TAMRA to section

7430(c)(7) would have included the 30-day letter as a “position”

of the Government under section 7430(c)(7).   As with the proposed

RRA 1998 amendment to section 7430(c)(7), Congress rejected the

proposed amendment to section 7430(c)(7) in TAMRA.   See H. Conf.

Rept. 100-1104 (Vol. II), at 225-226 (1988), 1988-3 C.B. 473,

715-716.   In addition, despite the numerous amendments to section

7430 since the section was first enacted in 1982, the “position

of the United States” has never been defined in section

7430(c)(7) to include the 30-day letter.   We find this fact

compelling.

     If Congress had wanted the “position of the United States”

to include the 30-day letter, it could have explicitly said so.
                              - 23 -

This Court is “not at liberty to supply by construction what

Congress has clearly shown its intention to omit.”    Carey v.

Donohue, 

, 437 (1916); see also INS v.

Cardoza-Fonseca, 

, 442-443 (1987) (“Few principles of

statutory construction are more compelling than the proposition

that Congress does not intend sub silentio to enact statutory

language that it has earlier discarded in favor of other

language").   The fact that Congress considered an amendment to

section 7430(c)(7) to allow recovery of administrative costs in

situations before the issuance of a notice of deficiency or

Appeals Office decision, but chose not to do so convinces us that

it would be inappropriate to interpret the RRA 1998 amendment of

section 7430(c)(2) by grafting a concomitant amendment onto

section 7430(c)(7).

     Finally, we note that neither section 7430(c)(2) nor section

7430(c)(7) is rendered meaningless, or is otherwise contradicted,

by the other.   All parts of a statute must be read together, and

each part should be given its full effect.    See McNutt-Boyce Co.

v. Commissioner, 

, 469 (1962), affd. per curiam 

 (5th Cir. 1963).   We find no reason why the language of

each should not be given its full effect.    Accordingly, we

interpret section 7430(c)(7) to limit recovery of administrative

costs to those situations in which a notice of deficiency or

Appeals Office decision has been issued.    In these situations and
                                - 24 -

these situations alone, section 7430(c)(2) allows for the

recovery of administrative costs incurred from the date of the

30-day letter.

     B.   The Reviewer’s Proposal

     Petitioners claim that respondent did take a “position” as

manifested in the reviewer’s proposal.      Specifically, petitioners

argue that the reviewer’s proposal constitutes a “notice of

deficiency” for purposes of section 7430(c)(7) and that,

accordingly, the date on which it was submitted for review to the

District Counsel, namely March 27, 1998, is the date on which

respondent took a position.    We disagree.

     The reviewer’s proposal is not a notice of deficiency for

purposes of section 7430(c)(7).    A statutory notice of deficiency

has a specific, technical meaning.       A “notice of deficiency” is

defined in section 6212(a) as a notice from the Secretary sent to

the taxpayer by certified or registered mail in which the

Secretary has determined that there is a deficiency in respect of

any tax imposed by subtitle A or B or chapter 41, 42, 43, or 44.

See Shut Out Dee-Fence, Inc. v. Commissioner, 

, 1200-

1201 (1981).     The plain language of section 6212(a) requires that

the notice, at a minimum, indicate that the Commissioner

determined that a deficiency exists for a particular year,

specify the amount of the deficiency, and be sent to the
                               - 25 -

taxpayer.   See Benzvi v. United States, 

 (11th Cir.

1986).

     In this case, respondent never determined a deficiency for

any particular year and never sent the reviewer’s proposal to

petitioners.   Accordingly, the reviewer’s proposal does not

constitute a “notice of deficiency” within the meaning of section

7430(c)(7).    See also Estate of Gillespie v. Commissioner, 

, 397 (1994) (30-day letter not a notice of deficiency

for purposes of section 7430).

     Petitioners further contend that the term “notice of

deficiency” in section 7430(c)(7) should not be given the same

meaning it has under section 6212, and that for purposes of

section 7430(c)(7)(B)(ii) it is inconsequential that the

reviewer’s proposal was neither issued nor sent to them.    Again,

we disagree.

     We have previously found, and the Regulations provide, that

the meaning of the term “notice of deficiency” in section 7430(c)

is the same as the meaning of that term in section 6212.    See

Estate of Gillespie v. Commissioner, supra; sec. 301.7430-

3(c)(3), Proced. & Admin. Regs..   Under well-established rules of

statutory construction, identical words used in different parts

of the same statute are to be given a similar meaning in the

absence of a contrary legislative intent.   See Helvering v.

Stockholms Enskilda Bank, 

, 87 (1934).   We find no
                                - 26 -

reason for interpreting the term “notice of deficiency” in

section 7430(c)(7) differently from the meaning of that term

under section 6212.     See Barnhill v. Johnson, 

, 406

(1992); Sorenson v. Secy. of Treasury, 

, 860 (1986).

     C.    Conclusion

     In conclusion, given that petitioners were never issued a

notice of deficiency or an Appeals Office notice, we find that

respondent never took a position for purposes of section

7430(c)(4) and that petitioners are therefore not “prevailing

parties” entitled to recover administrative costs under section

7430(a).

     We have considered all of petitioners’ contentions and

arguments.   To the extent any contention or argument is not

discussed, we find it to be without merit and/or irrelevant.

     To reflect the foregoing,


                                           An appropriate order and

                                      decision will be entered.