The opinion of the court was delivered by: H. LEE SAROKIN
Before the court is plaintiff's motion for attorney's fees under 26 U.S.C. § 7430.
There was a saying years ago (before parking tickets became as expensive as Broadway shows) that recommended: "Pay the two dollars." The philosophy behind that pithy but profound postulate was that the cost and aggravation of fighting the government or one of its agencies usually was not worth the battle no matter how righteous the cause.
How unfortunate for Ms. Wade that she did not follow this ancient adage -- this brief brocard -- although in this case it should have been: "Forget the two dollars!" For in her quest to obtain the sum of $ 343, rightly due her from the Internal Revenue Service, arising from her 1981 tax return, she spent several years and incurred some $ 10,000 in legal fees. Letters, telephone calls, conferences and pleas of mercy could not persuade the Internal Revenue Service to alter its position.
Finally, plaintiff instituted suit in the United States District Court in Brooklyn, New York. The government responded not by defending the claim, which was indefensible, but rather by seeking its dismissal on the ground that venue properly lay in New Jersey rather than in New York.
As a result, the matter was then transferred to New Jersey, and after having two federal courts review it, on April 21, 1993, judgment was entered by consent in favor of Ms. Wade and against the Internal Revenue Service for $ 343 plus interest. Plaintiff now seeks recompense for her quest and victory.
Plaintiff Yvonne Wade and her then-husband George Wade filed a joint income tax return in 1981. Certain audit adjustments made in connection with the 1981 return resulted in a refund due to Yvonne and George Wade of $ 774.64. Plaintiff and her husband were divorced in 1989. On October 15, 1990, the entire amount of the refund due on the 1981 joint return was applied, pursuant to 26 U.S.C. § 6402(c), to a past due child support obligation of plaintiff's husband.
Plaintiff then filed a claim for "injured spouse" relief using the required Form 8379, requesting her portion of said refund. The Internal Revenue Service (IRS) Center in Holtsville, N.Y. denied plaintiff's request in a letter dated July 17, 1991. Plaintiff tried unsuccessfully through correspondence with and telephone calls to various IRS personnel to have this decision reversed, and eventually filed this suit in the United States District Court for the Eastern District of New York in August, 1992.
The United States moved to have the case dismissed due to improper venue, on the grounds that the plaintiff resides in East Orange, New Jersey. After a hearing, the case was transferred to this district. The government was granted until March 22, 1993 to answer or otherwise respond. On March 19, 1993, the government conceded to plaintiff's position. On or about March 20, the United States filed an Answer and Consent to Judgment. On April 14, the court informed the United States that it requested a form of Judgment as opposed to an Answer and Consent to Judgment. A Judgment was forwarded to the court on April 14, and was entered against the United States on April 21, 1993, in the amount of $ 343.00 plus statutory interest from October 15, 1990 until paid. The judgment has been paid, and plaintiff now seeks attorney's fees pursuant to 26 U.S.C. § 7430. The government opposes the motion.
Section 7430 provides that a "prevailing party" may be awarded attorney's fees incurred in administrative proceedings and in litigation. 26 U.S.C. § 7430(a)(1) & (2). A "prevailing party" is defined as one who, inter alia, establishes that the "position of the United States" in the administrative proceedings or the litigation was not substantially justified. 26 U.S.C. § 7430(c)(4)(A).
The statute provides specific definitions of the "position of the United States" in administrative proceedings and in litigation. The government argues that under these specific definitions, plaintiff does not qualify for attorney's fees under either the administrative costs provisions or the litigation costs provisions. Plaintiff argues that denying her attorney's fees on the basis of these technical definitions would "elevate form over substance and [lead] to an inequitable result." Plf. Reply at 2. She argues that she is entitled to either administrative costs from the date of the July 17, 1991 denial letter, or to litigation costs from the time she filed suit in the Eastern District of New York on August 26, 1992.
A. Administrative Proceedings
For purposes of awarding fees incurred in administrative proceedings, the "position of the United States" is defined as "the position taken in an administrative proceeding . . . as of the earlier of (i) the date of the receipt by the taxpayer of the notice of the decision of the Internal Revenue Service Office of ...