## Facts

- The IRS issued a notice of deficiency for tax years 1983–1986 asserting about $127,000 in deficiencies and about $45,000 in additions to tax.
- The taxpayers petitioned the U.S. Tax Court to contest the asserted liabilities.
- Before trial, the parties stipulated to a settlement: a $21,004 deficiency for 1984, no deficiencies for 1985–1986, and no penalties; the taxpayers agreed before receiving the IRS’s detailed computations.
- The Tax Court entered a decision reflecting the settlement; the IRS later sent computations, which the taxpayers eventually believed overstated the deficiency.
- After unsuccessful negotiations, the taxpayers (with permission) filed an untimely motion to vacate or revise the original decision, about 86 days after the computations were mailed.
- The parties reached a new settlement; the Tax Court entered a revised decision.
- The taxpayers moved for attorney’s fees and litigation costs under I.R.C. § 7430; the Tax Court denied fees and reconsideration, finding the taxpayers had “unreasonably protracted the proceedings.”

## Issues

1. Whether the taxpayers’ notice of appeal from the Tax Court’s denial of attorney’s fees was timely under Fed. R. App. P. 13(a) when a timely motion to vacate or revise the fee denial was filed.
2. Whether the Tax Court clearly erred in finding the taxpayers “unreasonably protracted the proceedings” under I.R.C. § 7430(b)(4), disqualifying them from attorney’s fees.

## Decision

- The Ninth Circuit held it had appellate jurisdiction because the appeal was timely under Rule 13(a) measured from the order disposing of the timely post-decision motion addressed to the fee denial.
- The court reversed the Tax Court’s denial of attorney’s fees, holding the Tax Court clearly erred in finding unreasonable protraction.
- The case was remanded for the Tax Court to determine the proper amount of fees and costs under § 7430.

## Legal Principles

- Under Fed. R. App. P. 13(a), when a timely motion to vacate or revise is filed, the time to appeal runs from entry of the order disposing of that motion, including when the appealed order concerns attorney’s fees.
- I.R.C. § 7430(b)(4) bars an award of litigation costs if the prevailing party “unreasonably protracted the proceedings.”
- Agreeing to a settlement before reviewing final computational details, without more, is not unreasonable protraction when the settlement is a conventional step toward resolving the case.
- Delay in filing a motion to vacate or revise during ongoing negotiations, particularly where the Tax Court permits the filing and there is no showing of bad faith or dilatory purpose, does not constitute unreasonable protraction.

## Conclusion

The Ninth Circuit concluded that the taxpayers’ appeal was timely and that their conduct did not amount to unreasonable protraction under § 7430(b)(4), reversed the denial of attorney’s fees, and remanded for calculation of the award.


Nordvik v. Commissioner, 67 F.3d 1489 (9th Cir. 1995)