Code section 7430 generally allows taxpayers who prevail against the IRS in court to be awarded reasonable litigation and administrative costs. But in the Thousand Oaks Residential Care Home I, Inc., et al case, the Tax Court denied any recovery to the taxpayer.
IRS conceded that the taxpayer substantially prevailed with respect to the most significant issues in the case, but nonetheless the IRS was off the hook for cost reimbursement because IRS’ positions were substantially justified. And the Court agreed.
So, even though the taxpayers won the case, the costs of doing so were held to be “on them,” because the IRS did not take an unreasonable position in the matter.