Robert Stein & Elaine Stein

• Court: United States Tax Court
• Decided: June 17, 2021
• Docket: 22695-18
• Status: Published

Opinion

156 T.C. No. 11

UNITED STATES TAX COURT

ROBERT STEIN AND ELAINE STEIN, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 22695-18. Filed June 17, 2021.

Ps petitioned this Court pursuant to I.R.C. sec. 7430(f)(2) for review of R’s denial of an application for an award of administrative costs. Ps now move to dismiss the petition.

Held: The Court has discretion to grant Ps’ motion to dismiss because the petition did not invoke the Court’s jurisdiction to redetermine a deficiency under I.R.C. sec. 6213(a) and the Court thus is not required to enter a decision under I.R.C. sec. 7459(d) or any similar provision. See Mainstay Bus. Sols. v. Commissioner, 156 T.C. ___ (Mar. 4, 2021); Jacobson v. Commissioner, 148 T.C. 68 (2017); Davidson v. Commissioner, 144 T.C. 273 (2015); Wagner v. Commissioner, 118 T.C. 330 (2002).

Held, further, because R does not oppose Ps’ motion and will not be prejudiced by dismissal, the motion will be granted.

Served 06/17/21 -2-

Richard Sam Lehman, for petitioners.

Alexander N. Martini and Lauren B. Epstein, for respondent.

OPINION

GALE, Judge: The petition in this case seeks review of respondent’s

decision denying petitioners’ application for an award of reasonable administrative

costs under section 7430(a)(1).1 Petitioners resided in Florida when the petition

was filed. After respondent filed his answer to the petition, petitioners filed a

motion to voluntarily dismiss this case (motion), to which respondent does not

object. We must now decide whether we have the authority to grant petitioners’

motion without entering a decision.

Section 7430(a)(1) provides that a taxpayer who prevails in an

administrative proceeding before the Internal Revenue Service (IRS) concerning

“the determination, collection, or refund of any tax, interest, or penalty” may be

entitled to an award of the reasonable costs incurred in connection with the

administrative proceeding. The taxpayer may make a request for such an award by

filing a written application with the IRS. See sec. 7430(b)(4); sec. 301.7430-2(c),

1 Unless otherwise noted, all section references are to the Internal Revenue Code of 1986, as amended, and all Rule references are to the Tax Court Rules of Practice and Procedure. -3-

Proced. & Admin. Regs. Pursuant to section 7430(f)(2), this Court has jurisdiction

to review the IRS’ decision granting or denying (in whole or in part) the taxpayer’s

application for an award, provided that the taxpayer files a timely petition for

review of the decision.

The timely filing of a petition invoking our jurisdiction under section

7430(f)(2) commences an independent (or stand-alone) action for the recovery of

administrative costs. See Gustafson v. Commissioner, 97 T.C. 85, 88 (1991). That

is, our jurisdiction under section 7430(f)(2) is distinct from our jurisdiction under

section 6213(a) over petitions for redetermination of deficiencies. Deficiency

cases under section 6213(a) have historically made up the bulk of the cases before

the Tax Court, see Davidson v. Commissioner, 144 T.C. 273, 274 (2015), and

section 7459(d) provides that in such cases “a decision of the Tax Court dismissing

the proceeding shall be considered as its decision that the deficiency is the amount

determined by the Secretary.” A taxpayer consequently may not avoid entry of a

decision in a deficiency case by moving to withdraw the petition. Estate of Ming

v. Commissioner, 62 T.C. 519, 522-523 (1974).

In addition to our deficiency jurisdiction, however, Congress has granted

this Court jurisdiction to review various IRS administrative determinations,

including determinations concerning collection actions under sections 6320 and -4-

6330, see secs. 6320(c), 6330(d)(1), determinations concerning “innocent spouse”

relief from joint and several liability, see sec. 6015(e)(1), determinations

concerning whistleblower awards, see sec. 7623(b)(4), and determinations

concerning interest abatement, see sec. 6404(h)(1). We have previously granted

motions to voluntarily dismiss or withdraw petitions invoking our jurisdiction to

review each of those types of determinations. See Mainstay Bus. Sols. v.

Commissioner, 156 T.C. ___, ___ (slip op. at 3-5) (Mar. 4, 2021) (section

6404(h)(1)); Jacobson v. Commissioner, 148 T.C. 68, 70-71 (2017) (section

7623(b)(4)); Davidson v. Commissioner, 144 T.C. at 278-279 (section 6015(e)(1));

Wagner v. Commissioner, 118 T.C. 330, 332-334 (2002) (sections 6320(c) and

6330(d)(1)). In those instances the petitions did not implicate our deficiency

jurisdiction; consequently section 7459(d) did not mandate entry of decisions in the

Commissioner’s favor upon the dismissals.

Because there is no Rule that governs motions for voluntary dismissal, we

look to the Federal Rules of Civil Procedure to guide our consideration of such

motions. See Rule 1(b), (d); Wagner v. Commissioner, 118 T.C. at 332-333, 333

n.6. Under rule 41(a)(1)(A) of the Federal Rules of Civil Procedure, a plaintiff

may voluntarily dismiss a civil action without a court order either by filing a notice

of dismissal before the opposing party serves an answer or a motion for summary -5-

judgment or by filing a stipulation of dismissal signed by all parties who have

appeared. Otherwise, a case may be dismissed at a plaintiff’s request only by court

order. See Fed. R. Civ. P. 41(a)(2). A court “enjoys broad discretion in

determining whether to allow a voluntary dismissal” pursuant to rule 41(a)(2) of

the Federal Rules of Civil Procedure, Pontenberg v. Bos. Sci. Corp., 252 F.3d

1253, 1255 (11th Cir. 2001), and such a dismissal should generally be granted

“unless the defendant will suffer clear legal prejudice, other than the mere prospect

of a subsequent lawsuit, as a result”, McCants v. Ford Motor Co., 781 F.2d 855,

856-857 (11th Cir. 1986) (emphasis omitted). When a court issues an order

granting a voluntary dismissal, the dismissal is deemed to be without prejudice and

the lawsuit is treated as if it had never been filed. See Pontenberg, 252 F.3d

at 1255; Wagner v. Commissioner, 118 T.C. at 333-334.

The petition in this case does not invoke our deficiency jurisdiction. Section

7459(d) therefore does not apply, and we are aware of no similar provision that

would require us to enter a decision upon dismissal of a stand-alone petition for

recovery of administrative costs. Accordingly, consistent with our holdings in

Mainstay, Jacobson, Davidson, and Wagner, we hold that we have discretion to

grant a motion for voluntary dismissal of a stand-alone petition invoking our

jurisdiction under section 7430(f)(2). -6-

In exercising our discretion, we must determine whether the defendant (here,

the Commissioner) would “lose any substantial right * * * [as a result of] the

dismissal.” See Wagner v. Commissioner, 118 T.C. at 333 (quoting Durham v.

Fla. E. Coast Ry. Co., 385 F.2d 366, 368 (5th Cir. 1967)). To make that

determination, we “weigh the relevant equities and do justice between the parties

in each case, imposing such costs and attaching such conditions to the dismissal as

are deemed appropriate.” Id. (quoting McCants, 781 F.2d at 857). Because

respondent does not object to our granting petitioners’ motion, we conclude that he

will not be prejudiced by dismissal.2 We will accordingly grant the motion.

To reflect the foregoing,

An appropriate order of dismissal

will be entered.

2 We also note in this regard that the period for filing a petition for review of respondent’s decision, which is dated September 21, 2018, appears to have expired (assuming the decision was sent to petitioners by certified or registered mail). See sec. 7430(f)(2) (providing that a petition for review must be filed before the 91st day after mailing of notice of a decision by certified or registered mail). Petitioners are therefore unlikely to have the option to pursue further litigation against respondent with respect to the administrative decision upon which this case is based.