Decision will be entered for respondent.
MORRISON,
Some of the facts in this case have been stipulated. We incorporate those facts in the Court's findings of fact. McCauley was a resident of Illinois when she filed her petition.
In 2006, McCauley received $32,000 in settlement of an employment-discrimination 2014 Tax Ct. Memo LEXIS 43">*44 lawsuit against a former employer. In that lawsuit she was represented by attorney Dolores Pino. She paid Pino $13,679.50 in 2006 for handling the lawsuit. Besides the settlement proceeds, McCauley received $20,116.50 in wages and $14,392.20 in taxable Social Security benefits during 2006.
Assisted by Pino, McCauley filed her federal income-tax return for the 2006 tax year. The return reported a tax liability of $3,249. The taxable income upon which this tax liability was based reflected the following calculations: *46 • Taxable income did not include the $20,116.50 in wages. (The $20,116.50 was reported as wages on one part of the return. However, it was omitted from the computations of taxable income.) • Taxable income included the $14,392.20 in taxable Social Security benefits. • Taxable income included the $32,000 of settlement proceeds. • Taxable income was reduced by $13,679.50 for the amount McCauley paid Pino for handling the employment-discrimination lawsuit. (However, the $13,679.50 appeared on the return in such a way that it was not apparent that it corresponded to a payment for attorney's fees or that it corresponded to any payment at all.)
In September 2007 the IRS sent McCauley 2014 Tax Ct. Memo LEXIS 43">*45 a Notice CP11 in which it recalculated McCauley's tax liability as $11,076.2 The taxable income upon which this tax liability was based reflected the following calculations: *47 • Taxable income included the $20,116.50 in wages. • Taxable income included the $14,392.20 in taxable Social Security benefits. • Taxable income included the $32,000 of settlement proceeds. • Taxable income was not reduced by $13,679.50.
On September 17, 2007 the IRS assessed the $11,076 tax liability reflected on the Notice CP11.
McCauley disputed the assessment with the IRS. She was represented by Pino. McCauley took the position that the $3,249 tax liability reported on her 2006 return was correct and the $11,076 tax liability that the IRS assessed was wrong. The IRS took the position that the $11,076 assessment was correct.
During her dispute with the IRS McCauley had a hearing with the IRS Office of Appeals. On January 21, 2009, the Office of Appeals notified McCauley that it had decided that the $11,076 assessment was correct.
In January 2010, Pino spoke with an IRS examiner. Shortly 2014 Tax Ct. Memo LEXIS 43">*46 afterwards, the IRS reached a compromise agreement with McCauley regarding her 2006 income tax liability. The compromise agreement was reflected in an amended return that McCauley submitted on February 2, 2010, and by an abatement of tax by the IRS on March 15, 2010. On the amended return McCauley calculated her taxable *48 income by including the $20,116.50 in wages. The amended return reported tax liability of $7,626. The abatement of tax resulted in the abatement of $3,450, an amount that corresponds to a reduction in McCauley's taxable income by the $13,679.50 in attorney's fees. After the abatement, $7,626 was left unabated. The parties' positions and their compromise agreement are illustrated by the following table:
| Wages | -0- | $20,116.50 | $20,116.50 |
| Taxable Social Security benefits | $14,392.20 | 14,392.20 | 14,392.20 |
| Settlement | 32,000.00 | 32,000.00 | 32,000.00 |
| Attorney's fees | -13,679.50 | -0- | -13,679.50 |
| Tax | 3,249.00 | 11,076.00 | 7,626.00 |
On 2014 Tax Ct. Memo LEXIS 43">*47 April 11, 2010, McCauley mailed the IRS a request for reimbursement of the costs she allegedly incurred during her dispute. After receiving no response from the IRS for over six months, McCauley filed a petition with this Court.
Under
The "amount in controversy shall include the amount in issue as of the administrative proceeding date".
*50 In her dispute with the IRS McCauley took the position that her tax liability was $3,249. She maintained this position from the time she filed her return in 2007 until the parties reached the compromise agreement around January 2010. The IRS took the position that McCauley's tax liability was $11,076. It maintained this position from the time it issued the CP11 in September 2007 until the parties reached a compromise agreement around January 2010. The difference between the two party's positions—$7,827—is "the amount in issue" or the "amount in controversy". Of the $7,827 amount in controversy, McCauley prevailed as to $3,450 (i.e., the IRS's $11,076 position minus the $7,626 reflected in the compromise agreement). Thus, of the $7,827 in controversy, McCauley prevailed as to only 44% (i.e., $3,450/$7,827). On the basis 2014 Tax Ct. Memo LEXIS 43">*49 of that percentage, we hold that McCauley did not substantially prevail with respect to the amount in controversy.
*51 We also hold that McCauley did not substantially prevail with respect to the most significant issue presented. The two issues presented in her dispute with the IRS were: (1) whether her taxable income should be reduced by $13,679.50 for the attorney's fees for her employment-discrimination lawsuit and (2) whether her taxable income should include $20,116.50 in wages. We hold that the attorney's-fee issue was not the most significant issue. In dollar amount, the attorney's-fee issue was worth less than the wage issue. The attorney's-fee issue did not affect McCauley's other tax years.
In summary, McCauley did not substantially prevail; therefore, she was not the prevailing party. Therefore, she is not entitled to an award of any administrative costs she may have incurred. In reaching our holdings, we have considered all arguments made by the parties, and to the extent that we have not discussed them, we find that they are 2014 Tax Ct. Memo LEXIS 43">*51 moot, irrelevant, or without merit.
To reflect the foregoing,
