Avvo Rating 10.0

Individual Entitled to Reasonable Litigation Costs

David A. Sprecace, P.C.

J.C. Morreale, TC Memo. 2021-90, Dec. 61,902(M)

I wanted to wait until my client received his check before reporting this.  It is possible to recover “reasonable litigation costs” pursuant to 26 U.S.C. 7430.  As VitalLaw puts it:

“An individual was entitled to reasonable litigation costs. The taxpayer was tied up in litigation relating to his failure to file his tax returns and pay taxes for two years at issue and bankruptcy proceedings. Once the litigation regarding his outstanding tax liabilities concluded, the taxpayer filed a motion for costs in the Tax Court.

At trial, in deciding whether the government’s position was substantially justified, the court relied on United States vs. Johnson, 920 F.3d 639. The IRS contended that its position was substantially justified overall even though, in its initial response to the taxpayer’s motion, it previously conceded that at least one substantive issue and its related costs were not substantially justified. By contrast, the taxpayer argued that applying a holistic approach of Johnson to this case was not appropriate and would create an absurd result.  However, the court believed that the taxpayer’s hyperbole was misplaced.

Nonetheless, the court concluded that the IRS failed to prove that the position of the government was substantially justified under the Johnson standard. Further, since the IRS had otherwise conceded that the taxpayer was a prevailing party, the taxpayer was entitled to an award under Code Sec. 7430.

Additionally, the taxpayer contended that he was entitled to an enhancement of the statutory rate because it would have been impossible to retain qualified counsel at the statutory rate and because of the difficulty of the issues presented in this case. However, this did not justify a departure from the statutory rate and the taxpayer failed to prove his entitlement to such a departure. Accordingly, the taxpayer was entitled to an award at the statutory rate.”


Colorado Office
600 17th St #2800s

Denver, CO 80202

Client Reviews

Dave has ridden to our rescue on many occasions. It’s not that I try to get in trouble but Dave is always there to bail me out. Dave went toe-to-toe with the IRS over a several year legal battle. Nothing like having a...

- Russell and Lisa P.

My business partner and I hired Dave to represent us with an IRS tax audit of our company and individual tax returns. There were other family members and other businesses involved, and the IRS initially wanted more than...

- Mark M.

I called Dave to help me file several years of income tax returns. After the returns were filed, Dave filed an Offer in Compromise to get rid of the old taxes. The IRS accepted a small fraction of the original amount...

- Mike W.

When I needed to buy out my business partner, Dave told me of the possible pitfalls with the Operating Agreement, walked me through the entire process, helped me value the company, and make an offer. I was able to keep...

- Yvonne A.

Contact Us

Fill out the contact form or call us at (303) 454-8260 to schedule your consultation.

Leave Us a Message