Portillo v. C.I.R., No. 92-4526

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Writing for the CourtBefore WISDOM and DUHE; HAIK
Citation988 F.2d 27
Parties-1395, 93-1 USTC P 50,222 Ramon PORTILLO and Dolores Portillo, Petitioners-Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
Docket NumberNo. 92-4526
Decision Date13 April 1993

Page 27

988 F.2d 27
71 A.F.T.R.2d 93-1395, 93-1 USTC P 50,222
Ramon PORTILLO and Dolores Portillo, Petitioners-Appellants,
v.
COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
No. 92-4526.
United States Court of Appeals,
Fifth Circuit.
April 13, 1993.

David Leeper, Leeper & Leeper, El Paso, TX, for petitioners-appellants.

Bridget Rowan, Gary R. Allen, Chief, Richard Farber, Appellate Section, Tax Div., U.S. Dept. of Justice, Abraham N. M. Shashy, Jr., Chief Counsel, IRS, Washington, DC, for respondent-appellee.

Appeal from a Decision of the United States Tax Court.

Before WISDOM and DUHE, Circuit Judges and HAIK, 1 District Judge.

HAIK, District Judge:

Ramon and Dolores Portillo appeal an order of the Tax Court denying them litigation costs. A previous panel of this Court reversed the Tax Court's decision in part, affirmed in part, and remanded for recalculation. Portillo v. C.I.R., 932 F.2d 1128 (5th Cir.1991). We find that the Tax Court abused its discretion in denying costs. We reverse, remand to the Tax Court for a determination of reasonable attorney fees and litigation costs, and deny sanctions.

Page 28

The petitioners seek to have their litigation costs reimbursed as provided in 26 U.S.C. 7430. Recovery of litigation costs is proper when the prevailing party shows that the position of the government in the underlying litigation is not substantially justified.

FACTUAL AND PROCEDURAL BACKGROUND

Ramon and Dolores Portillo live in El Paso and own a small house painting business. The 1984 tax return filed by the Portillos reports that $10,800 was received from Mr. Navarro, a general contractor. Mr. Portillo used his receipt books to reach this figure, since Navarro had not supplied him with a timely 1099 report. When Navarro's Form 1099 was filed (in 1985) it revealed a substantial discrepancy from the information provided by the Portillos. Navarro reported that he paid $35,305 to Portillo in 1984.

During an investigation into this matter, the IRS was informed by Navarro that he could not provide documentary support for the amount reportedly paid to Portillo. Despite the apparent unreliability of the 1099 reporter (Mr. Navarro), the IRS issued a notice of deficiency to the Portillos. When the Portillos requested a redetermination of the deficiency, the IRS took the position that their notice of deficiency was presumed to be correct. The burden of proving that the excess payments were not received was imposed upon the Portillos.

Predictably, the Portillos failed to overcome the heavy burden of proving nonpayment. The Tax Court ruled in favor of the IRS. The position of the government was affirmed. The Portillos sought relief by way of an appeal to this Court. That appeal resulted in a finding that the Commissioner's determination was arbitrary and erroneous. The judgment of the Tax Court regarding the issue of unreported income was reversed. Portillo, supra. The case was remanded for recalculation of taxes owed by the Portillos.

Upon remand, the Portillos petitioned for reimbursement of litigation costs. The Tax Court denied the motion for costs.

The Portillos now appeal the denial of litigation costs. Petitioners' motions for sanctions and additional costs of this appeal are carried with the case.

POSITION OF IRS NOT SUBSTANTIALLY JUSTIFIED

Under Section 7430 of Title 26, a prevailing party may recover reasonable litigation costs. To qualify as a prevailing party, the tax litigant must establish that the position of the United States in the underlying litigation was not "substantially justified." 26 U.S.C. § 7430(c)(4)(A)(i). The litigant must...

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23 practice notes
  • Reser v. C.I.R., No. 96-60393
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • 12 Mayo 1997
    ...v. Commissioner, 68 F.3d 868, 880 (5th Cir.1995); Portillo v. Commissioner, 932 F.2d 1128, 1135 (5th Cir.1991), rev'd on other grounds, 988 F.2d 27 (5th Cir.1993). 64 26 U.S.C. § 6653(a)(1)(1988). 65 See 26 U.S.C. § 6653(a)(3)(1988); Durrett v. Commissioner, 71 F.3d 515, 518 (5th Cir.1996);......
  • Wilkerson v. U.S., No. 94-40713
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • 23 Octubre 1995
    ...the district court's conclusion that the IRS's position on the levies was not substantially justified. 14 See Portillo v. Commissioner, 988 F.2d 27, 28-29 (5th Cir.1993) (holding IRS's position not substantially justified where they relied solely on unsupported information); Nalle, 55 F.3d ......
  • Marre v. U.S., HP-84
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • 22 Julio 1997
    ...discretion, and will reverse only if we have a definite and firm conviction that an error of judgment was committed. Portillo v. C.I.R., 988 F.2d 27, 28 (5th Having reviewed the record, we conclude Agritech has failed to demonstrate that the government's position in the litigation vis-a-vis......
  • Information Resources, Inc. v. U.S., No. 92-1585
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • 30 Julio 1993
    ...fees. A position is "substantially justified" if "there is a reasonable basis both in law and in fact." Portillo v. Commissioner, 988 F.2d 27, 28 (5th Cir.1993). The government's failure to prevail on a liability issue does not mandate a determination of lack of substantial justification. S......
  • Request a trial to view additional results
23 cases
  • Reser v. C.I.R., No. 96-60393
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • 12 Mayo 1997
    ...v. Commissioner, 68 F.3d 868, 880 (5th Cir.1995); Portillo v. Commissioner, 932 F.2d 1128, 1135 (5th Cir.1991), rev'd on other grounds, 988 F.2d 27 (5th Cir.1993). 64 26 U.S.C. § 6653(a)(1)(1988). 65 See 26 U.S.C. § 6653(a)(3)(1988); Durrett v. Commissioner, 71 F.3d 515, 518 (5th Cir.1996);......
  • Wilkerson v. U.S., No. 94-40713
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • 23 Octubre 1995
    ...the district court's conclusion that the IRS's position on the levies was not substantially justified. 14 See Portillo v. Commissioner, 988 F.2d 27, 28-29 (5th Cir.1993) (holding IRS's position not substantially justified where they relied solely on unsupported information); Nalle, 55 F.3d ......
  • Marre v. U.S., HP-84
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • 22 Julio 1997
    ...discretion, and will reverse only if we have a definite and firm conviction that an error of judgment was committed. Portillo v. C.I.R., 988 F.2d 27, 28 (5th Having reviewed the record, we conclude Agritech has failed to demonstrate that the government's position in the litigation vis-a-vis......
  • Information Resources, Inc. v. U.S., No. 92-1585
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • 30 Julio 1993
    ...fees. A position is "substantially justified" if "there is a reasonable basis both in law and in fact." Portillo v. Commissioner, 988 F.2d 27, 28 (5th Cir.1993). The government's failure to prevail on a liability issue does not mandate a determination of lack of substantial justification. S......
  • Request a trial to view additional results

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