T.C. Memo. 2002-259
UNITED STATES TAX COURT
MAURICE W. SPIEGEL, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 619-00. Filed October 9, 2002.
Maurice W. Spiegel, pro se.
Leonard T. Provenzale, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
COLVIN, Judge: Respondent issued a final determination
disallowing petitioner’s claim under section 6404(e) to abate
interest related to petitioner’s 1987, 1989, 1991, and 1992 tax
- 2 -
years.1 Petitioner timely filed a petition under section
6404(g)2 and Rule 280.
The sole issue for decision is whether respondent’s denial
of petitioner’s request to abate interest relating to his 1989,
1991, and 1992 tax years was an abuse of discretion. We hold
that it was not.
Section references are to the Internal Revenue Code as
amended. Rule references are to the Tax Court Rules of Practice
and Procedure.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
A. Petitioner and the $150,000 Estimated Tax Payment
Petitioner resided in Boca Raton, Florida, when he filed his
petition. He is a retired attorney.
On April 15, 1986, petitioner paid $150,000 in estimated tax
to respondent from his and his wife’s joint checking account.
Respondent credited the payment to petitioner’s 1986 tax year.
1
Respondent concedes that the statute of limitations on
collections bars respondent from collecting any tax liability for
petitioner’s 1987 tax year. Thus, abatement of interest
associated with petitioner’s 1987 tax year is moot.
2
This was redesignated sec. 6404(i) by the Internal
Revenue Service Restructuring and Reform Act of 1998, Pub. L.
105-206, secs. 3305(a), 3309(a), 112 Stat. 685, 743, 745.
Sec. 6404(i) was later redesignated sec. 6404(h) by the
Victims of Terrorism Relief Act of 2001, Pub. L. 107-134, sec.
112(d)(1)(B), 115 Stat. 2427, 2434-2435.
- 3 -
B. Petitioner’s Separation and Filing of Separate Returns
Petitioner and his wife separated in September 1986. They
filed separate returns for 1986 and 1987.
Petitioner reported a tax liability of $11,985 on his 1986
return. In 1987, petitioner requested that respondent: (1)
Credit $11,985 of the $150,000 payment to his liability for 1986;
(2) credit $70,000 to his estimated tax for 1987; and (3) refund
$68,015. On November 23, 1987, respondent (1) credited $70,000
to petitioner’s tax liability for 1987, and (2) refunded $68,015
to petitioner.
C. Respondent’s 1988 Reallocation of the $150,000 Payment
As of April 1988, respondent had credited $81,985 of the
$150,000 payment to petitioner’s 1986 and 1987 tax years and
refunded $68,015 to petitioner. Despite that, in April 1988, the
accountant for petitioner’s wife asked respondent to allocate the
$150,000 payment in proportion to the tax liability of each
spouse for 1986. In April or May 1988, respondent allocated
$14,471.10 of the $150,000 estimated tax payment to petitioner
and $135,582.90 to his wife. Respondent’s position now is that
the $68,015 refund was erroneous, but that the time provided to
respondent under section 6532(b) to sue to recover an erroneous
refund has expired.
- 4 -
D. Petitioner’s Tax Returns for 1987-92
Petitioner filed his 1987 Federal income tax return on
October 14, 1988. On it, he claimed that he should be credited
with a $70,000 estimated tax payment which he believed had been
carried forward from the $150,000 payment. However, because
respondent had reallocated the $150,000 estimated tax payment
between petitioner and his wife as described above, respondent
disallowed petitioner’s carryover of the $70,000 credit from the
$150,000 payment.
Petitioner filed tax returns for 1988 through 1992 on which
he carried forward estimated tax payments as follows:
Year Claimed estimated tax payments
carryforward
1988 $62,592
1989 62,592
1990 52,799
1991 52,799
1992 45,314
Respondent disallowed petitioner’s carryovers of estimated
tax payments to tax years 1988, 1989, 1991, and 1992 because
respondent had reallocated most of the $150,000 tax payment to
petitioner’s wife, leaving nothing for petitioner to carry
forward to those years. Respondent assessed additional taxes for
petitioner for 1989 on September 14, 1992.
- 5 -
E. Petitioner’s Divorce Agreement
Petitioner and his wife signed a “Stipulation and
Agreement,” dated January 30, 1989. Article 6.6 of that
agreement permitted the parties to retain any refund on separate
returns they filed. Petitioner and his wife had no agreement to
allocate estimated tax payments. Petitioner and his wife were
divorced in May 1989.
F. Respondent’s Levy on Petitioner’s Keogh Account
On October 13, 1993, respondent levied $14,246.41 from
petitioner’s Keogh account and credited that amount to
petitioner’s 1985 tax year. Also on October 13, 1993, respondent
subtracted $14,246.41 from the amount credited to petitioner’s
1985 tax year and credited that amount to his 1989 tax year.
G. Petitioner’s Claim for Refund
Petitioner filed a claim for a $57,532.41 refund for 1992 on
September 28, 1995. He calculated that amount by reducing the
$70,000 estimated tax payment by his tax liabilities of $7,408
for 1987, $9,886 for 1989, $7,485 for 1991, $2,351 for 1992, and
then increasing the balance by $93 for withholding in 1989 and by
$14,246.41 and $343 for levies on Keogh and bank accounts in
1993.3 Respondent denied petitioner’s claim on May 15, 1996.
3
We note that the correct balance after decreases for
petitioner’s tax liabilities and increases for withholdings
levies would be $57,552.41, if the $70,000 estimated tax payment
were available as a carryover.
- 6 -
H. Respondent’s Communication With Petitioner in 1998 Regarding
Respondent’s 1988 Reallocation of the $150,000 Payment
On July 28, 1998, respondent told petitioner by letter that
respondent had reallocated the $150,000 payment in proportion to
the tax liability for 1986 of petitioner and his former wife and
that, as a result, petitioner had unpaid tax liabilities for
1987, 1989, 1991, and 1992. The record does not show whether
petitioner knew before July 28, 1998, that respondent had
reallocated the $150,000 payment.
I. Tax Collection Waiver and Respondent’s Final Determination
On October 15, 1998, petitioner signed a Form 900, Tax
Collection Waiver, in which he agreed to extend to December 31,
2000, the period for respondent to collect tax that respondent
had assessed on December 19, 1988, for 1987, and on November 19,
1990, for 1989.
On August 12, 1999, respondent issued a final determination
denying petitioner’s claim to abate interest under section
6404(e).
OPINION
A. Background
The Commissioner may abate part or all of the interest
assessed on any deficiency or payment of income, gift, estate,
and certain excise tax to the extent that any error or delay in
payment is attributable to erroneous or dilatory performance of a
ministerial act by an officer or employee of the Commissioner if:
- 7 -
(1) The erroneous or dilatory ministerial act occurred after the
Commissioner notified the taxpayer in writing about the
deficiency or payment, and (2) the taxpayer did not contribute
significantly to the error or delay. Sec. 6404(e)(1).4
4
Sec. 6404(e)(1) as enacted in 1986 and as applicable here
provides:
SEC. 6404(e). Assessments of Interest Attributable
to Errors and Delays by Internal Revenue Service.--
(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, or
(B) any payment of any tax
described in section 6212(a) to the
extent that any error or delay in
such payment is attributable to
such officer or employee being
erroneous or dilatory 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 or payment.
Congress amended sec. 6404(e) in 1996 to permit abatement of
interest for “unreasonable” error and delay in performing a
(continued...)
- 8 -
A ministerial act is a procedural or mechanical act that does not
involve the exercise of judgment or discretion by respondent.
Sec. 301.6404-2T(b)(1), Temporary Proced. & Admin. Regs., 52 Fed.
Reg. 30163 (Aug. 13, 1987). The Tax Court has jurisdiction to
review whether the Commissioner’s failure to abate interest was
an abuse of discretion. Sec. 6404(g)(1); Krugman v.
Commissioner, 112 T.C. 230, 239 (1999); Woodral v. Commissioner,
112 T.C. 19, 23 (1999).
B. Petitioner’s Contentions
Petitioner contends that respondent’s denial of his request
to abate interest on his tax liability for 1989, 1991, and 1992
was an abuse of discretion. Petitioner alleges that respondent:
(1) Incorrectly allocated part of the $150,000 estimated tax
payment to his spouse; (2) illegally levied petitioner’s Keogh
account on August 30, 1993; (3) erroneously applied funds taken
by levy to petitioner’s 1985 taxable year; and (4) improperly
applied petitioner’s tax collection waiver to a 1992 assessment
for the 1989 tax year.
Respondent contends that there were no errors or delays due
to ministerial acts by respondent and that respondent’s refusal
4
(...continued)
“ministerial or managerial” act. Taxpayer Bill of Rights 2 (TBOR
2), Pub. L. 104-168, sec. 301(a), 110 Stat. 1452, 1457 (1996).
That standard first applies to tax years beginning after July 30,
1996, TBOR 2, sec. 301(c), 110 Stat. 1457, and thus does not
apply in the instant case.
- 9 -
to abate interest was not an abuse of discretion.
1. Whether Respondent’s Refusal To Abate Interest That
Accrued as a Result of Respondent’s Reallocation of the
$150,000 Estimated Tax Payment Was a Ministerial Error
Petitioner points out that he timely paid tax for 1989,
1991, and 1992, and that respondent assessed interest only
because respondent reallocated most of the $150,000 estimated tax
payment to his former wife. Petitioner contends that the
reallocation was a ministerial error. We disagree.
Petitioner’s wife asked respondent to reallocate the
$150,000 payment between petitioner and herself. Respondent told
petitioner that the reallocation was based on tax liabilities
reported on their separate 1986 returns. Respondent’s
reallocation of the estimated tax payment required the exercise
of judgment in evaluating petitioner’s wife’s claim, and deciding
whether and how much to allocate to each spouse. Respondent’s
refusal to abate interest that accrued as a result of that
decision was not ministerial.5
5
Since respondent’s reallocation of the $150,000 estimated
tax payment was not ministerial, we need not decide if it was an
error. Compare Gordon v. United States, 757 F.2d 1157, 1160
(11th Cir. 1985), and Gens v. United States, 230 Ct. Cl. 42, 673
F.2d 366, 368 (1982) (overpayment allocated between spouses in
proportion to their tax payments), with Bloomfield v.
Commissioner, 52 T.C. 745, 752 (IRS properly allocated refund of
overpayment on a joint return to wife; husband’s redress lies in
suit against her for contribution). If respondent seeks payment
through use of lien or levy procedures of any amount owing from
petitioner as a result of respondent’s reallocation of
petitioner’s $150,000 payment, petitioner may be able to obtain
judicial review of that issue (1) on a prepayment basis in a
subsequent collection action in this Court under sec. 6330, or
(continued...)
- 10 -
2. Whether Petitioner Is Entitled to Abatement of Interest
as a Result of (a) Respondent’s Levy on Petitioner’s
Keogh Account; (b) Respondent’s Initial Crediting of
the Levied Funds to 1985; or (c) Petitioner’s Agreement
To Extend the Time To Assess Tax
Petitioner seeks abatement of interest related to his 1989
tax year on the grounds that respondent allegedly improperly
levied his Keogh account, and applied the funds levied from his
Keogh account to his 1985 year before posting them to his 1989
year. We disagree. Respondent’s levy resulted in collection of
tax, which reduced the amount of interest that would otherwise
have accrued. No interest accrued because of the levy.
Respondent credited the levied funds to petitioner’s 1985 tax
year on October 13, 1993, but subtracted the levied amount and
credited those funds to petitioner’s 1989 tax year, also on
October 13, 1993. No additional interest accrued for 1989 as a
result of crediting the levied funds to petitioner’s 1985 tax
year.
On October 15, 1998, at respondent’s request, petitioner
signed a tax collection waiver for assessments which extended to
December 31, 2000, the time to collect petitioner’s tax
liabilities assessed on December 19, 1988, for tax year 1987, and
on November 19, 1990, for tax year 1989. However, no additional
interest accrued for 1989 as a result of petitioner’s signing the
tax collection waiver.
5
(...continued)
(2) in a subsequent refund case in a refund forum.
- 11 -
C. Conclusion
For the foregoing reasons, we conclude that respondent’s
denial of petitioner’s claim to abate interest relating to his
1989, 1991, and 1992 tax years was not an abuse of discretion.
To reflect the foregoing,
Decision will be
entered for respondent.