TAX RESEARCH MEMO TEMPLATE

June 30, 2015

Relevant Facts

Robert Jones has just rendered service for a taxpayer as an expert witness in a case heard by the U. S. Tax Court. The taxpayer is requesting reimbursement for Jones’ fees and for those amounts paid to her attorney in presenting the case. Jones’ billing rate for this type of engagement is $500 per hour, the market rate for such services in his city, plus out- of- pocket expenses (e. g., auto mileage, computer charges).

Specific Issues

How much of Jones’ fee will the taxpayer recover?

Conclusions

Internal Revenue Code §7430 (c) authorizes the IRS and federal courts to award recovery of court cost to any taxpayer who prevails against the United States. The recovery of court cost includes attorneys’ fees and taxpayer’s expert witness fees to the taxpayer(s) when [1] the IRS fails to establish that its position in an administrative or court proceeding was substantially justified and [2] when the taxpayer complies with all of the following 7430’s procedural requirements. It is assumed that the following requirements are pertinent to this case:
•The taxpayer did not unduly prolong the litigation
•The taxpayer pursued the case through IRS administrative appeals
•The taxpayer then “substantially prevailed” in the Tax Court.
The taxpayer has the right to request an award of attorneys’ fees and taxpayer’s expert witness fees within 30 days by formal letter or/and at the conclusion of the proceeding; failure to do so will disqualify/ make the taxpayer become ineligible for the award of fees. Based on the information presented above, the taxpayer requested the reimbursement within an adequate amount of time; therefore, the reimbursement should be considered. If the procedural requirements of 7430 are met, the taxpayer may recover a reasonable litigation cost from the United States for the court proceeding on the behalf of its expert witness. According to §7430(c)(1)(B)(iii), “the reasonable fees paid or incurred for the services in connection with the court proceeding, shall not be in excess of $125 per hour unless the court determines that a special factory, the difficulty of the issues presented in the case, or the local availability of tax expertise, justifies a higher rate”. Therefore, the taxpayer should be able to recover the reasonable (minimum) amount of $125 per hour (inflation and/or court discretion may increase the allowance) for Robert Jones, the expert witness. This is the same amount that may be recovered for the taxpayer’s attorney fees. This amount is $375 per hour less than what Mr. Jones charges. Roughly 25 % of the fees will be recovered.

Support

§7430(b) (1) Limitations; Requirement that administrative remedies be exhausted
§7430(c)(1)(B)(iii) Reasonable litigation costs based on prevailing market rates
§7430(c) (4) (A)(i)(I) Prevailing party-In general: amount in controversy
§7430(c) (4) (A)(ii) Prevailing party-In general: most significant issue
§7430(b) (3) U.S. establishes a position that’s substantially justified: Effect of losing on substantially similar issues

Actions to Be Taken

________ Discuss with client. Date discussed ________

____x____ Prepare a memo or letter to the client

________ Explore other fact situations

________ Other action. Describe:___________________________

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Preparer ________ Reviewer ________ Partner ________