Sarah S. O'Nan

United States Tax Court

T.C. Memo. 2024-57

SARAH S. O’NAN,

Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

__________

Docket No. 5115-17. Filed May 15, 2024.

__________

Harlan S. Louis, for petitioner.

Lauren M. Dynes, Jonathan E. Behrens, and Richard L. Wooldridge, for

respondent.

MEMORANDUM OPINION

COPELAND, Judge: Petitioner, Sarah S. O’Nan, petitioned this

Court after the Commissioner of Internal Revenue (Commissioner)

granted her innocent spouse relief under section 6015(f) 1 but denied her

request for refund of $123,200 under section 6015(g)(1). Following trial,

we held that the Commissioner must refund Mrs. O’Nan all but $3,340

(plus interest) of her requested amount. O’Nan v. Commissioner, T.C.

Memo. 2023-117, at *13. Mrs. O’Nan then timely filed a Motion for

Reasonable Litigation or Administrative Costs (Motion) pursuant to

section 7430 and Rule 231. We must now decide whether Mrs. O’Nan

1 Unless otherwise indicated, statutory references are to the Internal Revenue

Code, Title 26 U.S.C. (I.R.C.), in effect at all relevant times, regulation references are

to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times,

and Rule references are to the Tax Court Rules of Practice and Procedure. Some dollar

amounts are rounded.

Served 05/15/24

2

[*2] qualifies under section 7430 for an award from the United States of

any or all of her legal or administrative costs.

Background

The following facts are derived from our previous Opinion in this

case, the parties’ pleadings, the Stipulation of Facts, Mrs. O’Nan’s

Motion, and the Commissioner’s Response to the Motion. Mrs. O’Nan

resided in Ohio when she filed her Petition.

I. Facts and Holdings

Mrs. O’Nan was married to Jonathan P. O’Nan until his death on

November 25, 2014. In May 2012 the O’Nans bought a home in Ohio

(family home). The deed conveyed legal title to the O’Nans in joint

tenancy with right of survivorship, referred to in Ohio law as a

“survivorship tenancy.” See Ohio Rev. Code Ann. § 5302.20(A)

(LexisNexis 2022). The family home was eventually encumbered by two

mortgages, each securing a different loan evidenced by a promissory

note. Wells Fargo Bank (Wells Fargo) held the primary mortgage,

initially recorded by WCS Lending, LLC, in a deed filed in October 2012

and assigned to Wells Fargo in January 2015. First Bexley Bank (First

Bexley) held the secondary mortgage, recorded in a deed filed in October

2013. While both Mr. and Mrs. O’Nan signed the two mortgage deeds,

only Mr. O’Nan signed the promissory note secured by the primary

mortgage (subsequently assigned to Wells Fargo). The record does not

indicate whether Mr. and Mrs. O’Nan cosigned the First Bexley note or

whether instead only one of them did so.

The O’Nans jointly and timely filed their federal income tax

returns for 2012 and 2013 (years in issue), but they did not pay their

reported tax liabilities upon filing. The Internal Revenue Service (IRS)

assessed the reported liabilities for the two years in issue on November

18, 2013, and November 17, 2014, respectively, while Mr. O’Nan was

still living. After issuing a notice and demand for each tax year, the IRS

filed a notice of federal tax lien (NFTL) against the O’Nans on April 28,

2015, and sent them a notice of NFTL filing that same day. The notice

of NFTL filing stated that the O’Nans owed $24,683 and $90,108 for

2012 and 2013, respectively.

In June 2015 Mrs. O’Nan sold the family home for $895,000. The

title company presiding over the sale remitted the following pertinent

amounts from the sale proceeds: (1) $14,290 in closing costs; (2) $423,020

to Wells Fargo in full satisfaction of its primary loan; (3) $257,955 to

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[*3] First Bexley in full satisfaction of its secondary loan; (4) $123,200

to the IRS in full satisfaction of its tax lien, i.e., the outstanding tax

liabilities for the years in issue plus interest and penalties (IRS lien

payment); and (5) $76,535 to Mrs. O’Nan.

On May 6, 2015, before the home sale occurred, the IRS had

received from Mrs. O’Nan Form 8857, Request for Innocent Spouse

Relief, in which she requested relief from joint liability with Mr. O’Nan

for the years in issue. In a final determination letter dated February 13,

2017, the IRS, acting pursuant to section 6015(f), granted Mrs. O’Nan

partial relief from joint and several liability for 2012 and full relief for

2013. For tax year 2012 the IRS determined that Mrs. O’Nan remained

liable for $3,340. The determination letter also fully denied Mrs.

O’Nan’s claim for refund of the $123,200 IRS lien payment.

Mrs. O’Nan then filed her Petition contesting the refund denial.

Following trial, we found and held the following:

1. Mrs. O’Nan inherited Mr. O’Nan’s former one-half interest

in the family home fully subject to the IRS’s lien. O’Nan,

T.C. Memo. 2023-117, at *7.

2. When a requesting spouse is granted section 6015(f) relief,

we recalculate her federal tax liability as if she and her

spouse (or deceased spouse) had filed married-filing-

separately returns for the relevant years. O’Nan, T.C.

Memo. 2023-117, at *8 (citing Pullins v. Commissioner, 136

T.C. 432, 440 (2011)).

3. In light of Mrs. O’Nan’s section 6015(f) relief, the IRS’s lien

on the family home did not encumber her original one-half

interest in the family home except to the extent of $3,340

plus interest. O’Nan, T.C. Memo. 2023-117, at *8.

4. Under Ohio law governing survivorship tenancies, there

was a total of $447,500 (i.e., one-half of $895,000) of sale

proceeds attributable to Mr. O’Nan’s former one-half

interest out of which to satisfy the liabilities encumbering

it. Id. at *9.

5. Since Mrs. O’Nan signed the Wells Fargo mortgage deed

but not the promissory note, under Ohio law she was only

a surety for Mr. O’Nan’s obligation under the note. Id.

at *10.

4

[*4] 6. Since the closing costs were split equally between Mr. and

Mrs. O’Nan’s interests, and since Wells Fargo held priority

over both First Bexley and the IRS, only $17,335 of

proceeds attributable to Mr. O’Nan’s former one-half

interest remained for First Bexley and the IRS after Wells

Fargo’s satisfaction. Id. at *12.

7. By a preponderance of the evidence, Mrs. O’Nan was not

the sole signer of the First Bexley promissory note.

Therefore, since First Bexley had priority over the IRS,

none of the IRS lien payment could have come from

proceeds attributable to Mr. O’Nan’s former one-half

interest. Id. at *12–13.

8. Therefore, the entire IRS lien payment came from Mrs.

O’Nan’s separate funds. Pursuant to section 6015(g)(1),

she must be refunded all but $3,340 plus interest. O’Nan,

T.C. Memo. 2023-117, at *13.

II. The Parties’ Administrative and Litigation Positions

On February 13, 2017, the IRS Office of Appeals 2 issued its final

determination letter regarding Mrs. O’Nan’s innocent spouse relief

request. That letter granted Mrs. O’Nan partial relief for 2012 and full

relief for 2013 but stated:

Your refund isn’t allowed under the Internal

Revenue Code (the Code). We can’t refund your payments

or credits if you filed your claim for relief more than 2 years

after you paid the tax, unless you filed your claim within

three years of the date you filed your return (Section 6511

of the Code). Refunds are not available for:

• Payments made with the joint return

• Joint payments

• Payments made solely by the other spouse

• A joint overpayment from another tax year that was

applied to this debt (unless you establish that you

2 On July 1, 2019, the IRS Office of Appeals was renamed the IRS Independent

Office of Appeals. See Taxpayer First Act, Pub. L. No. 116-25, § 1001, 133 Stat. 981,

983 (2019). We will use the name in effect at the times relevant to this case, i.e., the

IRS Office of Appeals.

5

[*5] provided some or all of the funds for the

overpayment)[.]

In her Petition, filed March 2, 2017, Mrs. O’Nan contended (in

relevant part):

[T]he lien recorded by the IRS in April 2015 was improper.

It was not timely. It was for the tax obligation of another

person [i.e., Mr. O’Nan].

....

According to the IRS, the 2013 assessment was

made on November 17, 2014. By law, the earliest that the

IRS’s automatic lien can arise is ten days after the

assessment (November 27, 2014). Jonathan P. O’Nan

(“Jon”) died tragically on November 25, 2014. Upon Jon’s

death, their home immediately transferred to Petitioner

Sarah S. O’Nan (“Sarah”) by operation of law. So by

November 27, 2014, the home was no longer Jon’s property,

and therefore, it was not available for an automatic

lien. . . . Sarah is deemed to be an innocent spouse.

Therefore, her home equity is not available to pay the tax

debts of her former husband. . . .

Even though the 2012 taxes were assessed and

noticed while Jon was alive, the lien was improper because

by the time it was recorded, Sarah (an innocent spouse)

was the sole owner of the property. Even if the lien had

been recorded prior to Jon’s death, the automatic transfer

at his death would have defeated the lien. A tax lien

recorded against only the deceased spouse does not survive

the death of the taxpayer.

On April 24, 2019, the Commissioner filed a Motion for Partial

Summary Judgment, asking the Court to rule on Mrs. O’Nan’s argument

that a section 6321 lien arises (at the earliest) ten days after assessment

rather than immediately upon assessment (lien argument). By Order

issued June 18, 2020, we granted partial summary judgment to the

Commissioner, ruling that the IRS’s section 6321 lien on Mr. O’Nan’s

one-half interest in the family home arose on November 17, 2014 (i.e.,

the date of assessment). We further indicated that under Ohio law the

lien was not extinguished upon Mr. O’Nan’s death.

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[*6] In a letter dated June 24, 2020, and addressed to the

Commissioner’s counsel in this case, counsel for Mrs. O’Nan, Harlan S.

Louis, proposed a settlement of the case and supported the proposal as

follows (in relevant part):

The partial summary judgment still leaves open our

contention that the IRS wrongfully took the home sale

proceeds from the equity share of Sarah to pay the tax debt

of someone else (Jon). During Jon’s life, Sarah and Jon

each owned a one-half interest in the real estate. As we

discussed last week, the Wells Fargo promissory note was

in Jon’s name alone. At the closing, Wells Fargo was paid

$423,019.92. This essentially wiped out all of the equity in

Jon’s share. So, when the IRS got paid $123,200.00, this

all came from Sarah’s share. But since Sarah is an

Innocent Spouse, her assets are not available to pay Jon’s

tax debt.

This letter was the first time Mrs. O’Nan conveyed to the Commissioner

her argument that the equity in Mr. O’Nan’s former one-half interest

was insufficient to account for the entire IRS lien payment (equity

argument). Mr. Louis repeated the equity argument in substantially the

same form in a settlement proposal dated January 11, 2021, and

addressed to the Commissioner’s counsel in this case, adding the

following explanation:

The facts are simply these: The foreclosure sales

price was $895,000. Attributing that 50% to Jon’s interest

yields $447,500. The pay-off of Wells Fargo leaves only

$24,480 in Jon’s share to pay debts including those having

priority well before the IRS. So, the $123,200 the IRS

received that day came from Sarah—not from Jon.

(Footnote omitted.) Also on January 11, 2021, Mrs. O’Nan filed her

Pretrial Memorandum, which stated the following (in relevant part):

[T]he IRS was paid $123,200.00 from Sarah’s property—

and not Jon’s property. . . .

....

On September 24, 2012, Jonathan P. O’Nan, as the

sole Borrower, signed a Promissory Note promising to pay

7

[*7] $412,300.00 to WCS Lending LLC (the “Wells Fargo

Note”).

....

BancOhio Nat’l Bank v. Powers, 1990 Ohio App.

LEXIS 4689 (10th Dist. Franklin Cty., Oct. 25, 1990). A

spouse (including a former spouse) has no obligation to pay

the debts of her spouse, including a promissory note not

signed by her.

The Commissioner rejected the equity argument in his Pretrial

Memorandum, at trial, and in his posttrial briefs. For instance, in his

Pretrial Memorandum he asserted that “Petitioner’s interest in the

family home was what remained after satisfaction of the mortgages and

respondent’s liens.” Likewise, in his Simultaneous Opening Brief he

wrote:

Because respondent’s lien interests in the property

were fully vested and protected under federal and state

law, petitioner only possessed an equity interest in the

property at issue to the extent that the sale price of the

home exceeded the value of the mortgage loans and

respondent’s vested lien interests, and petitioner did not

provide the funds totaling $123,200 applied in satisfaction

of the 2012 and 2013 liabilities.

In his Simultaneous Answering Brief, the Commissioner cited Cardinal

Financial Co., L.P. v. Filgueiras, No. L-18-1211, 2019 WL 2246074 (Ohio

Ct. App. May 24, 2019), for the proposition that “[b]ecause petitioner

signed the Wells Fargo Mortgage, that mortgage encumbered the

interest in the property at issue [i.e., the family home] which vested with

petitioner upon Mr. O’Nan’s death.”

III. Settlement Proposals

Mr. Louis sent four settlement proposals to the Commissioner’s

counsel during the course of this litigation. The first three proposals

were mailed and dated June 11, 2019, June 24, 2020, and January 11,

2021, respectively. The subject line of each letter read: “Settlement

Proposal (CONFIDENTIAL UNDER RULE 408) Sarah S. O’Nan v.

Commissioner, Tax Court Case No. 5115-17.” Mr. Louis sent the fourth

proposal by email on February 1, 2021, with substantially the same

subject line.

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[*8] The first proposal stated in part: “We propose that the IRS re-pay

to Sarah the sum of $92,400, plus interest. In turn, Sarah will agree to

dismiss the pending Tax Court case with prejudice.” The second

proposal stated in part: “[W]e propose that from the $123,200 taken, the

IRS pay back to Sarah $92,400, plus interest. In turn, Sarah will agree

to dismiss the pending case with prejudice.” The third proposal stated

in part: “[W]e propose that from the $123,200 foreclosure sale proceeds

received by the IRS, your client pay back to Sarah a settlement payment

of $85,000, plus interest. In turn, Sarah will agree to dismiss the

pending case with prejudice.” The fourth proposal stated in part:

On the high side, we propose that if the verdict at trial

provides for a payment to Sarah in excess of $90,000, we

agree to cap that award at $90,000, plus interest. On the

low side, we propose that if the verdict at trial provides for

a payment to Sarah less than $50,000 (including an IRS

win with no payment to Sarah), we agree to set a floor

payment to Sarah of $50,000, plus interest. And so, if the

court were to award Sarah an amount between $50,000 and

$90,000, the parties would accept that amount.

There is no evidence that the Commissioner’s counsel accepted any of

the proposals, none of which references section 7430 or includes the

phrase “qualified offer.”

IV. Request for Award

After we heard this case and issued our original Opinion, Mrs.

O’Nan requested an award under section 7430 of $86,956.21, comprising

$86,810.50 of attorney’s fees and $145.71 of costs (e.g., court filing fees

and postage). Mrs. O’Nan incurred the attorney’s fees on account of

work performed by Mr. Louis’s firm, Bailey Cavalieri, LLC, between

March 2015 and September 2023. The attorney’s fees were charged at

rates ranging from $155 per hour to $440 per hour, depending on the

position of the person at Bailey Cavalieri, LLC, performing the work.

Discussion

I. Section 7430 Overview

Section 7430 provides for the award of litigation or administrative

costs to a taxpayer in a proceeding brought by or against the United

States involving the determination, collection, or refund of any tax,

interest, or penalty. An award may be made where the taxpayer can

9

[*9] demonstrate that she (1) is the “prevailing party,” (2) exhausted

administrative remedies within the IRS, 3 (3) did not unreasonably

protract the proceeding, and (4) has claimed “reasonable” costs. I.R.C.

§ 7430(a), (b)(1), (3), (c)(1) and (2); Bryan S. Alterman Tr. v.

Commissioner, 146 T.C. 226, 227 (2016). The taxpayer bears the burden

of proving that these requirements are met. Rule 232(e). The

requirements are conjunctive; failure to satisfy any one of them

precludes an award. Alterman Tr., 146 T.C. at 227; Minahan v.

Commissioner, 88 T.C. 492, 497 (1987). The decision to award fees is

within the sound discretion of the Court. See William L. Comer Fam.

Equity Pure Tr. v. Commissioner, 958 F.2d 136, 139 (6th Cir. 1992) (per

curiam) (adopting an abuse of discretion standard for review of the Tax

Court’s decisions under section 7430), aff’g T.C. Memo. 1990-316. An

award of administrative costs may include only costs incurred on or after

the earliest of (1) the date the taxpayer received the notice of the decision

of the IRS Office of Appeals, (2) the date of the notice of deficiency

(if applicable), or (3) the sending date of the first letter of proposed

deficiency providing an opportunity for administrative review

(if applicable). I.R.C. § 7430(c)(2). For these purposes, the notice of the

decision of the IRS Office of Appeals is the final written document,

mailed or delivered to the taxpayer, that is signed by an individual in

the Office of Appeals who has been delegated the authority to settle the

dispute on behalf of the Commissioner, and states or indicates that the

notice is the final determination of the entire case. Treas. Reg.

§ 301.7430-3(c)(2). Moreover, a final notice of determination denying

innocent spouse relief is treated as a notice of deficiency for these

purposes. Id. subpara. (3).

Section 7430(c)(4)(A) specifies that an individual taxpayer is the

“prevailing party” if she (1) substantially prevailed with respect to either

the amount in controversy or the most significant issue (or set of issues)

presented and (2) had a net worth not in excess of $2 million at the time

she filed her petition. Alterman Tr., 146 T.C. at 228; Treas. Reg.

§ 301.7430-5(g)(1). However, even if the taxpayer meets these

requirements, she will not be treated as the prevailing party if the

Commissioner establishes that his position in the proceeding was

“substantially justified.” I.R.C. § 7430(c)(4)(B)(i). The Commissioner

bears the burden of proof on this issue. Id.; Rule 232(e). “Substantially

justified” means “justified to a degree that could satisfy a reasonable

person” or having a “reasonable basis both in law and fact.” Comer Fam.

3 This requirement applies only to claims for litigation costs. See I.R.C.

§ 7430(b)(1).

10

[*10] Equity Pure Tr. v. Commissioner, 958 F.2d at 139–40 (quoting

Pierce v. Underwood, 487 U.S. 552, 563–65 (1988)); Swanson v.

Commissioner, 106 T.C. 76, 86 (1996) (quoting Underwood, 487

U.S. at 565). The Commissioner’s position in litigation is generally

established at the time he files his answer to the taxpayer’s petition. See

I.R.C. § 7430(c)(7)(A); Maggie Mgmt. Co. v. Commissioner, 108 T.C. 430,

442 (1997). The Commissioner’s position in an administrative

proceeding is established as of the earlier of (1) the date of receipt of the

notice of decision of the IRS Office of Appeals or (2) the date of the notice

of deficiency (if applicable). I.R.C. § 7430(c)(7)(B); see also Maggie Mgmt.

Co., 108 T.C. at 442 (“The ‘not substantially justified’ standard is applied

as of the separate dates that respondent took positions, first in the

administrative proceedings and afterwards in the proceedings in this

Court.”).

If the taxpayer did not substantially prevail in litigation, or if the

Commissioner’s position was substantially justified, the taxpayer will

still be treated as the prevailing party if the court’s determination of her

tax liability (determined without regard to interest) is equal to or less

than the liability amount for which she offered to settle in a “qualified

offer.” I.R.C. § 7430(c)(4)(E). Section 7430(g) defines a qualified offer as

a written offer that (1) the taxpayer makes to the Commissioner during

the qualified offer period (beginning on the sending date of the first

letter of proposed deficiency offering administrative review and ending

30 days before the date the case is first set for trial), (2) specifies the

offered amount of the taxpayer’s liability (determined without regard to

interest), (3) is designated at the time it is made as a qualified offer for

purposes of section 7430, and (4) remains open during the period

beginning on the date the offer is made and ending on the earliest of the

date the offer is rejected, the date the trial begins, or the 90th day after

the offer is made. However, the taxpayer may not be treated as the

prevailing party on account of a qualified offer if the court’s judgment is

entered pursuant to a settlement or if “the amount of tax liability is not

in issue” in the proceeding. I.R.C. § 7430(c)(4)(E)(ii).

II. Administrative Costs Incurred Before February 13, 2017

As a preliminary matter, we note that Mrs. O’Nan has included

in her Motion a request for several thousand dollars’ worth of

administrative costs incurred before February 13, 2017, the date the IRS

Office of Appeals issued its final determination letter regarding her

innocent spouse relief request and request for refund. Regardless of

whether Mrs. O’Nan otherwise qualifies for an award under

11

[*11] section 7430, she may not recover administrative costs incurred

before the date of the final determination letter. See I.R.C. § 7430(c)(2);

Treas. Reg. § 301.7430-3(c).

III. Mrs. O’Nan’s Settlement Proposals

The Commissioner has conceded that Mrs. O’Nan substantially

prevailed in this case, that her net worth did not exceed $2 million when

she filed her Petition, that she exhausted her administrative remedies,

and that she did not unreasonably protract the proceedings. Thus, if

any of Mrs. O’Nan’s settlement proposals was a qualified offer, we may

award her administrative and litigation costs even if the

Commissioner’s position was substantially justified. See I.R.C.

§ 7430(c)(4)(E)(i).

However, the qualified offer provisions do not apply to “any

proceeding in which the amount of tax liability is not in issue.” I.R.C.

§ 7430(c)(4)(E). This case was instituted to dispute the Commissioner’s

refusal to provide a refund of amounts taken to satisfy the undisputed

tax liability of a third party (viz, Mr. O’Nan). Mrs. O’Nan’s tax liability

was not in issue during the IRS or Court proceedings; in particular, she

never contested the Commissioner’s partial denial of innocent spouse

relief for 2012. Moreover, Mr. O’Nan was not a party to these

proceedings, and in any event his own tax liability was never contested.

Therefore, no “amount of tax liability” was “in issue” when Mrs. O’Nan

brought her refund request before the IRS and then before this Court.

Even if we assume that the qualified offer provisions apply to

these proceedings, Mrs. O’Nan’s settlement proposals did not satisfy all

the procedural requirements under the statute. Specifically, none of her

proposals gave any indication that it purported to be a qualified offer for

purposes of section 7430. None of the proposals used the term “qualified

offer” or “7430,” nor did any of them indicate that Mrs. O’Nan would

seek an award of administrative or litigation costs should it not be

accepted. See I.R.C. § 7430(g)(1)(C) (“The term ‘qualified offer’ means a

written offer which . . . is designated at the time it is made as a qualified

offer for purposes of this section . . . .” (Emphasis added.)); McGowan v.

Commissioner, T.C. Memo. 2005-80, 89 T.C.M. (CCH) 1044, 1045;

Downing v. Commissioner, T.C. Memo. 2005-73, 89 T.C.M. (CCH) 1009,

1016–17, supplementing T.C. Memo. 2003-347.

Therefore, we hold that none of the settlement proposals was a

qualified offer under section 7430, and we must inquire further to

12

[*12] determine whether litigation or administrative costs may be

awarded to Mrs. O’Nan.

IV. Substantial Justification

Because no qualified offer was made, and in light of the

Commissioner’s concessions, our disposition of Mrs. O’Nan’s Motion

hinges on whether the Commissioner’s position during the proceedings

was “substantially justified.” See I.R.C. § 7430(c)(4)(B)(i). Until June

24, 2020 (at the earliest), Mrs. O’Nan’s only determinative contention in

this matter was the lien argument, viz, that the section 6321 lien did not

arise until Mr. O’Nan died and therefore never attached to his interest

in the family home (or, alternatively, that the lien was extinguished

upon Mr. O’Nan’s death). As indicated in our Order of June 18, 2020,

granting partial summary judgment to the Commissioner, the

Commissioner was fully justified in rejecting the lien argument, given

applicable statutory text and caselaw.

Only after our partial summary judgment ruling did Mrs. O’Nan

raise the equity argument, viz, that the equity in Mr. O’Nan’s former

one-half interest in the family home was insufficient to account for the

entire IRS lien payment. The equity argument presupposes that when

a section 6321 lien attaches to property jointly owned by two spouses

and one spouse is subsequently granted innocent spouse relief for some

or all of the tax liability secured by the lien, the lien then encumbers the

relieved spouse’s interest in the property only to the extent of the

liability (if any) for which she was not granted relief. See O’Nan, T.C.

Memo. 2023-117, at *8. We are not aware of any statute, regulation, or

judicial decision that either articulated or clearly implied this point of

law before our original Opinion in this case. Nor can we say that the

Commissioner’s response to the equity argument—viz, that an earlier-

arising section 6321 lien is unaffected by a grant of innocent spouse

relief—was not justified to a degree that could satisfy a reasonable

person. See Swanson, 106 T.C. at 86.

This Court and other courts have consistently held the

Commissioner’s position to be substantially justified, for purposes of

section 7430(c)(4)(B)(i), when his position addressed a question of first

impression that was not clearly settled by existing statutes or

regulations. See, e.g., TKB Int’l, Inc. v. United States, 995 F.2d 1460,

1468 (9th Cir. 1993); Castillo v. Commissioner, No. 18336-19L, 160 T.C.,

slip op. at 6 (June 5, 2023); Estate of Wall v. Commissioner, 102 T.C. 391,

394 (1994) (“This was a case of first impression, and respondent’s

13

[*13] position was not contrary to any published decision. Nor could a

reasonable person say that it lacked colorable justification.”),

supplementing 101 T.C. 300 (1993); Bontrager v. Commissioner, T.C.

Memo. 2019-45, at *6 (“The Commissioner generally is not subject to an

award of litigation costs under section 7430 where the underlying issue

is one of first impression.” (quoting Rowe v. Commissioner, T.C. Memo.

2002-136, 83 T.C.M. (CCH) 1762, 1769–70)); Blanco Invs. & Land, Ltd.

v. Commissioner, T.C. Memo. 1988-175, 55 T.C.M. (CCH) 677, 678

(holding the Commissioner’s position substantially justified when the

question at issue was one of first impression and the relevant statute “is

vague and gives little direction for deciding [the question at issue]”).

Since the Commissioner’s position was substantially justified

throughout the administrative and Court proceedings, we will deny Mrs.

O’Nan’s Motion. 4

To reflect the foregoing,

An appropriate order and decision will be entered.

4 We do not reach the Commissioner’s argument that the amount of legal fees

claimed by Mrs. O’Nan’s is not “reasonable.” See I.R.C. § 7430(c)(1) and (2).