Qualified Offers and the Recovery of Administrative and Litigation Costs from the IRS

Taxpayers and taxpayers’ counsel may be able to proactively fit within the net worth requirements set forth in 28 U.S.C. § 2412(d)(1)(B), which sets forth the standard applicable to both recovery of litigation costs and shifting the burden of proof to the government in tax cases. For example, a taxpayer may be able to successfully fit within net worth requirements by making distributions at any time before the date the case is filed. The following discussion provides a summary of this taxpayer position in recent litigation, the government’s opposition to this position, and the taxpayer’s appropriate—and successful—reply. In addition, relevant portions of the court’s holding and the case law the Government relied upon is also attached for the convenience of the reader. This discussion contains excerpts from Southgate Master Fund, LLC v. United States651 F. Supp. 2d 596 (N.D. Tex. 2009).

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Marc Teitelbaum

About Marc Teitelbaum

Marc Teitelbaum is the former chair of Dentons' Tax practice, which was recognized by The Legal 500 in 2020 for outstanding work in international and non-contentious tax. Marc has been involved in advising public companies, underwriters and investment funds principally in the following areas: acquisition and disposition of domestic and foreign corporations whether taxable or tax-free transactions; the US tax consequences of foreign operations and foreign joint ventures, in particular, multinational manufacturing and sales operations; debt and equity financings; and investment strategies in partnership form, including tax- and accounting-advantaged structured domestic and cross-border financing arrangements.

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John Harrington

About John Harrington

John Harrington is the co-leader of Dentons' US Tax practice, which was recognized by The Legal 500 in 2020 for outstanding work in international and non-contentious tax. Recognized by Chambers Global as a Notable Practitioner, he advises clients on inbound and outbound transactional and compliance issues; international tax legislative, regulatory and treaty matters; and a variety of domestic tax issues.

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