T.C. Memo. 2001-309
UNITED STATES TAX COURT
JAMES K. GAUDET, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 12832-00. Filed December 7, 2001.
James K. Gaudet, pro se.
Linda A. Neal, for respondent.
MEMORANDUM OPINION
DAWSON, Judge: This case was assigned to Special Trial
Judge Carleton D. Powell pursuant to section 7443A(b)(5) and
Rules 180, 181, and 183. All section references are to the
Internal Revenue Code applicable for the period involved, and all
Rule references are to the Tax Court Rules of Practice and
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Procedure. The Court agrees with and adopts the opinion of the
Special Trial Judge, which is set forth below.
OPINION OF THE SPECIAL TRIAL JUDGE
POWELL, Special Trial Judge: This case involves the denial
of a request by petitioner to respondent to abate interest under
section 6404(e). On February 9, 2000, petitioner submitted a
Form 843, Claim for Refund and Request for Abatement, to
respondent. The request pertained to the interest due on the
deficiency for the taxable year 1996. By letter dated June 23,
2000, respondent determined that petitioner was not entitled to
the requested abatement, and the request was denied by
respondent’s Appeals Office. On December 8, 2000, petitioner
filed a petition for review of that determination with this
Court. At the time the petition for review was filed, petitioner
resided in Gretna, Louisiana.
The facts may be summarized as follows. Petitioner prepared
a joint 1996 Federal income tax return with his then wife,
Virginia. Before or during 1996, Virginia’s parents had died,
and Virginia had received inheritances that she invested with
Legg Mason, a brokerage firm. Petitioner, an attorney, had
settled the estates of Virginia’s parents and was aware that she
had received the inheritances. Legg Mason sent Virginia a Form
1099 showing income of $14,248 for 1996. The Form 1099 was not
received until around April 20, 1997, after petitioner and
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Virginia had filed their 1996 tax return. Virginia gave
petitioner a Form 1099 that he filed away for their 1997 tax
return. Petitioner claims that Virginia told him that the Form
1099 pertained to the 1997 taxable year. Petitioner apparently
never looked at the form. Virginia received monthly statements
from Legg Mason, but petitioner did not review the statements in
preparing their 1996 tax return. Petitioner did not include any
income from Legg Mason in the 1996 tax return.
On July 20, 1998, respondent sent a Notice CP-2000, Proposed
Changes to Income or Withholding Tax, a so-called CP-2000 letter,
to petitioner and Virginia notifying them that they had
unreported interest and/or dividend income of $14,248. By letter
dated July 21, 1998, petitioner wrote respondent to “contest any
and all interest charges because your office should have notified
me during calander [sic] year 1996 and no later than the month of
August of 1996.” At least by July 1998, petitioner knew that the
deficiency had been proposed, but he wanted to “investigate it
before * * * [he replied].” By the end of September 1998,
petitioner knew that the proposed deficiency was correct.1
On February 5, 1999, respondent sent a notice of deficiency
to petitioner’s and Virginia’s last known address determining a
1
Petitioner later testified that he concluded that he owed
the tax only after the file was sent to New Orleans, Louisiana.
For reasons discussed infra, we believe that his earlier
testimony more accurately reflected what happened.
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deficiency of $3,990 on the unreported income from Legg Mason.
The notice was sent by certified mail, and respondent’s file
indicates that the notice was not returned. Petitioner claims
that he did not receive the notice, and no petition for a
redetermination was filed with this Court. By letter dated May
14, 1999, however, petitioner wrote respondent stating: “we do
not admit that the Legg Mason interest amounts are due”. He
further stated that he disputed the interest and penalties
because “the IRS did not notify us in a timely manner thereby
causing us to be infected [sic] with the said penalties and
interest.”
On or about August 23, 1999, petitioner sent a Form 843,
Claim for Refund and Request for Abatement, to respondent
requesting that the $3,990 deficiency, penalties, and interest be
abated. He alleged that the interest was caused by respondent’s
“errors or delays” and that the “penalty or addition to tax * * *
[was the] result of erroneous advice from the IRS.”
Although the record does not reveal the date, apparently at
some time subsequent, respondent assessed the deficiency. On
February 9, 2000, petitioner sent another Form 843 to respondent
seeking an abatement of the penalties and interest only. By
letter dated April 6, 2000, petitioner was notified by the
District Director that his request for abatement had been
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denied.2 Petitioner paid the deficiency of $3,990 on May 4,
2000. Petitioner sought review of his interest abatement request
by the Appeals Office. The Appeals Office denied petitioner’s
request by letter dated June 23, 2000.
Section 6404(e) provides in relevant part:
(1) In general.--In the case of any assessment of
interest on--
(A) any deficiency attributable in whole or in
part to any error or delay by an officer or employee of
the Internal Revenue Service (acting in his official
capacity) in performing a ministerial act, * * *
* * * * * * *
the Secretary may abate the assessment of all or any part of
such interest for any period. For purposes of the preceding
sentence, an error or delay shall be taken into account only
if no significant aspect of such error or delay can be
attributed to the taxpayer involved, and after the Internal
Revenue Service has contacted the taxpayer in writing with
respect to such deficiency * * *.
Section 6404(i)(1) provides further that the “Tax Court shall
have jurisdiction over any action brought by a taxpayer * * * to
determine whether the Secretary's failure to abate interest * * *
was an abuse of discretion, and may order an abatement”.3
The Internal Revenue Code does not define a ministerial act.
2
Respondent apparently did abate an addition to tax under
sec. 6651 for failure to timely pay the tax.
3
Sec. 6404(i) also contains jurisdictional requirements to
bring such an action. Respondent has not raised any
jurisdictional bar, and the Court is satisfied that these
prerequisites have been satisfied.
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The Report of the Senate Finance Committee accompanying the Tax
Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2085, states:
The committee does not intend that this provision be used
routinely to avoid payment of interest; rather, it intends
that the provision be utilized in instances where failure to
abate interest would be widely perceived as grossly unfair.
The interest abatement only applies to the period of time
attributable to the failure to perform the ministerial act.
* * * * * * *
The committee intends that the term “ministerial act”
be limited to nondiscretionary acts where all of the
preliminary prerequisites, such as conferencing and review
by supervisors, have taken place. Thus, a ministerial act
is a procedural action, not a decision in a substantive area
of tax law. For example, a delay in the issuance of a
statutory notice of deficiency after the IRS and the
taxpayer have completed efforts to resolve the matter could
be grounds for abatement of interest. The IRS may define a
ministerial act in regulations. [S. Rept. 99-313, at 208-
209 (1986), 1986-3 C.B. (Vol. 3) 1, 208-209.]
The regulations provide:
The term “ministerial act” means a procedural or mechanical
act that does not involve the exercise of judgment or
discretion, and that occurs during the processing of a
taxpayer's case after all prerequisites to the act, such as
conferences and review by supervisors, have taken place. 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., 52 Fed. Reg. 30163 (Aug. 13, 1987).]
While petitioner's original application for abatement
encompasses the deficiency and all the interest due for the 1996
taxable year, his subsequent request relates only to interest,
and at the hearing, petitioner narrowed the scope of his request
for abatement to the period between July 1998 (when he alleges
that he orally requested that the file be sent from the Internal
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Revenue Service Center in Chamblee, Georgia, to respondent’s
offices in New Orleans, Louisiana) to the date of payment. To
fit within the ambit of section 6404(e), petitioner must prove
that the accrual of interest during that period was the result of
a delay by employees of the Internal Revenue Service, acting in
their official capacity, in performing ministerial acts. See
sec. 6404(e)(1)(A). Respondent contends that the delay, if
indeed there was any delay, was not the result of a ministerial
act, and, therefore, section 6404(e)(1)(A) does not apply.
At the hearing, the following exchange occurred:
THE COURT: Where is the ministerial act that you
complain about?
THE WITNESS [petitioner]: It’s not a ministerial act.
It’s an error, and it’s primarily a delay in transporting
this case from Atlanta–-whatever–-to New Orleans.
We disagree with petitioner that there was an error or delay by
an employee of the Internal Revenue Service in performing a
ministerial act within the meaning of section 6404(e).
Congress did amend section 6404(e) in 1996 to permit
abatement of interest for “unreasonable” error and delay in
performing a “ministerial or managerial” act. Taxpayer Bill of
Rights 2 (TBOR 2), Pub. L. 104-168, sec. 301(a)(1) and (2), 110
Stat. 1457 (1996). That standard, however, applies to tax years
beginning after July 30, 1996. Id. subsec. (c). Petitioner’s
taxable year here began January 1, 1996, and the TBOR 2 amendment
does not apply.
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Furthermore, even if the amended section 6404(e) were
applicable, we seriously doubt whether under these circumstances
there was an “unreasonable error” in not sending the file to New
Orleans. The initial CP-2000 letter was issued from the Internal
Revenue Service Center in Chamblee, Georgia, and we would not
find that, by not sending petitioner’s file to New Orleans,
respondent unreasonably erred in performing a ministerial or
managerial act. Petitioner has failed to demonstrate how or why
that inaction would be unreasonable.
Finally, it should be noted that we are by no means
convinced that any delay, to which the accrued interest would be
attributable, was due to respondent’s action. Petitioner knew
his wife had assets inherited from her parents, but, when
preparing the tax return, he never bothered to determine what
income she had received from those assets. After the initial CP-
2000 letter from respondent, petitioner knew precisely what Legg
Mason had reported to respondent. Petitioner testified initially
that he knew he owed the tax in September 1998, and later he
changed his testimony. His second version was that he did not
know until the file was sent to New Orleans in April or May of
2000. But he had contacted Legg Mason in August 1998. His later
explanation that he did not know what information respondent had
before the file was sent to New Orleans has a decidedly hollow
ring. Realistically, the accrued interest was due to
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petitioner’s failure to pay the tax, and not to any error or
delay by respondent in performing a ministerial act.
Decision will be entered
for respondent.