Lloyd E. Latch and Constance A. Latch v. United States of America, and Does I Through X, Inclusive

ORDER

The memorandum disposition filed February 4, 1988, is redesignated as a Per Curiam Opinion per the attached Opinion.

OPINION

The United States of America appeals the district court’s judgment awarding Lloyd and Constance Latch (the “Latches”) $12,137.25 in attorney’s fees and costs pursuant to 26 U.S.C. § 7430 after the parties settled the underlying dispute concerning the Latches’ tax liability for 1975. We reverse.

BACKGROUND

An Internal Revenue Service (“IRS”) audit of the Latches’ 1975 joint federal tax return revealed that the Latches had claimed a $74,167 loss attributable to a limited partnership, though they had invested only $23,400 in it. The IRS offered to resolve a dispute over the amount de-ductable by allowing a $23,400 tax loss. However, the Latches failed to properly complete the form necessary to effectuate this settlement. As a result, the IRS sent a statutory notice of deficiency to the Latches and, after receiving no response, entered an assessment for income tax deficiency in the amount of $62,827.22.

The Latches initially sought to contest the IRS’ action through administrative channels. During this time, the Latches made some payments, but did…