T.C. Memo. 2000-241
UNITED STATES TAX COURT
JOHN B. COSGRIFF, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13247-98. Filed August 4, 2000.
John B. Cosgriff, pro se.
Charles B. Burnett, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
RUWE, Judge: On May 23, 1998, respondent issued a notice of
final determination denying petitioner’s claim to abate interest
on his 1992 Federal income tax liability. Petitioner timely
filed a petition to this Court under section 6404(g)1 and Rule
1
Sec. 6404(g) was redesignated sec. 6404(i) by the Internal
Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-
(continued...)
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280. The sole issue for decision is whether respondent abused
his discretion by denying petitioner’s request to abate interest.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and the accompanying exhibits are
incorporated herein by this reference. Petitioner resided in Las
Vegas, Nevada, at the time he filed his petition.
For the year 1992, petitioner worked as a bartender at the
Las Vegas Hilton and conducted an auto sales business.
Petitioner filed his 1992 Form 1040, U.S. Individual Income Tax
Return, on May 24, 1993. Petitioner reported a business loss of
$16,504 related to auto sales for his business “Whole Sale Auto”.
On September 12, 1994, respondent notified petitioner in writing
that his 1992 Federal income tax return had been selected for
examination and requested that petitioner arrange an appointment
and produce records substantiating his tip income and certain
items from his Schedule C, Profit and Loss From Business. On
November 14, 1994, petitioner provided respondent with his tip
diary but did not provide any information supporting his Schedule
C. On November 23, 1994, respondent notified petitioner of
proposed changes to his 1992 return. The proposed changes
1
(...continued)
206, secs. 3305(a), 3309(a), 112 Stat. 685, 743, 745. Unless
otherwise indicated, all section references are to the Internal
Revenue Code and all Rule references are to the Tax Court Rules
of Practice and Procedure.
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included the disallowance of petitioner’s Schedule C business
loss, the inclusion of certain royalties in income, and the
imposition of late-filing and accuracy-related penalties.
Thereafter, two appointments were scheduled between petitioner
and respondent’s agent to discuss the 1992 return, but petitioner
canceled both appointments. On April 19, 1995, respondent
notified petitioner that respondent’s previous proposed
determinations had not changed. On July 26, 1995, a notice of
deficiency was sent to petitioner determining a $2,483
deficiency, a $42 late-filing penalty, and a $497 accuracy-
related penalty. Petitioner did not file a petition with this
Court seeking a redetermination of the deficiency and penalties,
and the amounts determined in the notice of deficiency were
assessed.
On October 31, 1995, petitioner requested reconsideration of
respondent’s determination, but the request was denied because
petitioner had failed to timely contest the notice of deficiency.
On February 13, 1996, petitioner called a problem resolution
officer at the Ogden Service Center to request a review of his
1992 tax liability. The Problem Resolution Office in the Ogden
Service Center reviewed the matter and, in a letter to petitioner
dated May 3, 1996, informed petitioner that a review of his
account for 1992 indicated that the balance due was correct. In
June of 1996, petitioner sent a letter to Senator Bryan of Nevada
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requesting assistance in resolving his disagreement with the
Internal Revenue Service. Senator Bryan inquired about
petitioner’s situation. As a result, respondent reopened
petitioner’s case in August of 1996 and reconsidered the 1992
return. This time, petitioner provided receipts and information
concerning his 1992 Schedule C automotive business. On the basis
of the information provided, respondent abated $1,125 of the
deficiency, $539 in penalties, and $56.81 in interest. On
October 7, 1996, respondent denied petitioner’s subsequent
request for appellate consideration.
On April 2, 1997, petitioner filed a Form 843, Claim for
Refund and Request for Abatement. On August 15, 1997, respondent
notified petitioner than no penalties would be imposed but that
interest would not be abated. This notice invited petitioner to
request consideration with respondent’s Appeals Office within 30
days. On September 15, 1997, petitioner requested that his claim
for interest abatement be reconsidered by the Phoenix Appeals
Office. On April 23, 1998, the Appeals Office denied
petitioner’s claim for abatement of interest but notified him
that the case would be held open for 2 weeks to allow him an
opportunity to provide additional information. On May 23, 1998,
respondent issued a notice of final determination denying
petitioner’s claim for abatement of interest. Petitioner timely
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filed a petition to this Court seeking review of respondent’s
failure to abate interest.
OPINION
This Court may order an abatement of interest only where
there is an abuse of discretion by the Commissioner in refusing
to abate interest. See sec. 6404(i). In order to show an abuse
of discretion, petitioner must establish that respondent
exercised his discretion arbitrarily, capriciously, or without
sound basis in fact or law. See Rule 142(a); Woodral v.
Commissioner, 112 T.C. 19, 23 (1999).
Section 6404(e)(1) provides, in pertinent part, that the
Commissioner has discretionary authority to abate part or all of
an assessment of interest on: (1) Any deficiency attributable to
any error or delay by the Commissioner’s officers or employees in
performing a ministerial act; or (2) any payment of tax to the
extent any error or delay in such payment is attributable to such
officers or employees being erroneous or dilatory in performing a
ministerial act.2 An error or delay by the Commissioner can be
taken into account only if it occurs after the Commissioner has
contacted the taxpayer in writing with respect to the deficiency
2
In 1996, sec. 6404(e)(1) was amended by the Taxpayer Bill
of Rights 2, Pub. L. 104-168, sec. 301, 110 Stat. 1452, 1457
(1996), to allow the Commissioner to abate interest for an
“unreasonable” error or delay resulting from “managerial” and
ministerial acts. The amendment is in effect for tax years
beginning after July 30, 1996, and thus is not applicable in this
case. See Woodral v. Commissioner, 112 T.C. 19, 25 n.8 (1999).
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or payment and if no “significant aspect” of the error or delay
is attributed to the taxpayer. Sec. 6404(e)(1); Nerad v.
Commissioner, T.C. Memo. 1999-376. Because Congress did not
intend for section 6404(e) to be used routinely, we will order
abatement only “where failure to abate interest would be widely
perceived as grossly unfair.” Lee v. Commissioner, 113 T.C. 145,
149 (1999); H. Rept. 99-426, at 844 (1985), 1986-3 C.B. (Vol. 2)
1, 844; S. Rept. 99-313, at 208 (1986), 1986-3 C.B. (Vol. 3) 1,
208.
Petitioner argues that interest should be abated because:
(1) Hardships beyond his control prevented him from complying
with Federal income tax laws; (2) respondent failed to include
vital evidence in the stipulation of facts; (3) just before
trial, respondent’s attorney attempted to coerce petitioner into
dropping his abatement claim; and (4) respondent delayed
proceedings when petitioner was willing to settle his income tax
liabilities. Petitioner’s hardships, the content of the
stipulation of facts, and the coercion allegation are not proper
grounds for us to order interest abatement. Additionally, we
find these allegations to be unsupported by the evidence.
In order for petitioner to prevail, there must be an error
or delay in performing a ministerial act that is attributable to
respondent. A “ministerial act” does not involve the exercise of
judgment or discretion. Sec. 301.6404-2T(b)(1), Temporary
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Proced. & Admin. Regs., 52 Fed. Reg. 30163 (Aug. 13, 1987).3 It
is a procedural or mechanical act that occurs during the
processing of the taxpayer’s case after all prerequisites to the
act, such as conferences and review by supervisors, have taken
place. See id. The mere passage of time does not establish
error or delay in performing a ministerial act. See Lee v.
Commissioner, supra at 150.
For purposes of section 6404(e), an error or delay cannot be
considered for the period before September 12, 1994, because that
is when respondent first contacted petitioner in writing
regarding the deficiency. See sec. 6404(e)(1); Nerad v.
Commissioner, supra. Petitioner argues that respondent
incorrectly determined his income tax liabilities for 1992 and
that respondent failed to timely answer his correspondence or
meet with him. Regardless of whether respondent correctly
determined petitioner’s 1992 income tax liabilities, “A decision
concerning the proper application of federal tax law (or other
federal or state law) is not a ministerial act.” Sec. 301.6404-
2T(b)(1), Temporary Proced. & Admin. Regs., supra. Although
petitioner contacted respondent numerous times in connection with
his 1992 return, the evidence in the record shows that respondent
replied to petitioner’s correspondence in a timely manner that
3
On Dec. 18, 1998, the final regulation under sec. 6404 was
issued. “Ministerial act” is defined in the same manner in the
final regulation as in the temporary regulation.
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was not arbitrary, capricious, or without sound basis in fact or
law. See Woodral v. Commissioner, supra at 23.
Respondent reconsidered petitioner’s 1992 tax liability
despite his failure to file a petition contesting the notice of
deficiency. Thereafter, respondent exercised discretion in
abating a substantial portion of the prior assessment. Any
errors or delays were attributable to petitioner’s cancellation
of scheduled appointments and his failure to timely produce
requested information. Accordingly, we hold that respondent’s
denial of petitioner’s claim to abate interest was not an abuse
of discretion.
Decision will be entered for
respondent.