Tax Research Memo Gabrielle Cole
March 6th, 2015 Relevant Facts Robert Jones has just rendered service for a taxpayer as an expert witness in a case heard by the U. S. Tax Court. The taxpayer is requesting reimbursement for Jones’ fees and for those amounts paid to her attorney in presenting the case. Jones’ billing rate for this type of engagement is $500 per hour, the market rate for such services in his city, plus out of pocket expenses. Specific Issues How much of Jones’ fee will the taxpayer recover? Conclusions The Internal Revenue Code §7430 authorizes the prevailing party of an administrative or court proceeding, brought by or against the United States, to be awarded certain costs and fees. Certain costs and fees acceptable for recovery include attorney fees and expert witness fees based on the prevailing market rate for services in the area, and reasonable administrative costs as clarified by §7430(c)(1) and §7430(c)(2) . To be eligible, the taxpayer must be considered the prevailing party of the proceedings, in which they have substantially prevailed with respect toward the amount in controversy or to the set of issues presented. §7430(c)(4)(B) limits the prevailing party to be subject to fee recovery if the United States was able to establish that its position was substantially justified In accordance with §7430(c)(1)(B)(iii), reasonable litigation costs include the fees of attorneys, except in amounts greater than $125 per hour; however, §7430 only limits expert witnesses to be compensated at a rate less than or equal to the highest rate of compensation for expert witnesses in the United States. As long as Jones’ fee of $500 per hour not in excess of the highest expert witness rate, the taxpayer can expect to recover all amounts associated to the engagement and the market rate for services provided.
§7430 does not allow for the recompense of outofpocket expenses such as auto