In Re Grace Lilly, Debtor. Grace Lilly v. Internal Revenue Service, in Re Grace Lilly, Debtor. Grace Lilly v. Internal Revenue Service

Affirmed by published opinion. Judge HAMILTON wrote the opinion, in which Judge WILLIAMS and Judge MOTZ joined.

OPINION

HAMILTON, Circuit Judge:

The Internal Revenue Service (IRS) appeals the district court’s decision affirming the bankruptcy court’s decision in favor of the debtor, Grace Lilly. Grace Lilly cross-appeals the district court’s denial of her motion for attorney’s fees as the prevailing party. The IRS’s appeal presents the question of whether a taxpayer’s overstatement of the cost of goods sold (COGS) is an item “omitted from gross income” under 26 U.S.C.A. (I.R.C.) § 6013(e)(2)(A)…