T.C. Memo. 2003-106
UNITED STATES TAX COURT
ROBERT L. STEWART, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 12947-00. Filed April 17, 2003.
Robert L. Stewart, pro se.
Catherine L. Campbell, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
LARO, Judge: On June 22, 2000, respondent issued to
petitioner a notice of final determination with respect to
petitioner’s claim to abate interest on his 1990 income tax
deficiency under section 6404(e). In the notice, respondent
partially abated part of the interest and denied the balance of
petitioner’s claim. Petitioner timely filed a petition under
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section 6404(g)1 and Rule 280. We decide whether respondent
abused his discretion in failing to abate accrued interest in
whole. We hold he did not. Section references are to the
applicable versions of the Internal Revenue Code. 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.
The stipulated facts and the exhibits submitted therewith are
incorporated herein by this reference. Petitioner resided in
Sunnyside, Washington, when he petitioned the Court.2
On October 17, 1991, petitioner filed his 1990 Federal
income tax return. The tax return did not include in
petitioner’s gross income a brokerage fee and showed income tax
due of $10,325. Petitioner’s tax return was not accompanied by
any payment.
1
Sec. 6404(g) 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. 743. 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.
2435.
2
In his petition petitioner disputes $4,656.86. This
amount, however, consists of interest of $3,706.36 and of the
addition to tax of $950.50 under sec. 6651(a). On April 18,
2002, respondent moved the Court to dismiss for lack of
jurisdiction and to strike petitioner’s claim for abatement of
additions to tax. The Court granted respondent’s motion. See
Stewart v. Commissioner, T.C. Memo. 2002-139. Accordingly, we
limit our discussion to the interest abatement claim.
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On November 18, 1991, respondent assessed petitioner’s tax
liability for 1990 as shown on petitioner’s tax return. In
addition, respondent assessed an addition to tax of $413 under
section 6651(a) for failure to pay timely the tax due.
On April 19, 1993, respondent assessed additional income tax
due from petitioner of $3,802 due to the inclusion of the
brokerage fee. Petitioner did not dispute that determination by
respondent.
On October 28, 1993, petitioner filed a petition for Chapter
13 bankruptcy relief, which was subsequently converted to a
Chapter 7 case. Petitioner received a discharge on August 15,
1994, but for his 1990 income tax liability.
On August 14, 1995, respondent erroneously abated
petitioner’s income tax liability of $10,325. Respondent also
erroneously abated on the same date the addition to tax and
interest for 1990. (As discussed below, respondent reassessed the
amount of the addition to tax and interest on October 25, 1999.
Starting from January 15, 1996, respondent sent to
petitioner 39 monthly statements which did not reflect any
interest accrued against petitioner. The first monthly statement
showed petitioner’s 1990 income tax deficiency as $3,802.
Respondent concedes that those monthly statements were misleading
because they did not include any accrued interest.
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On January 26, 1996, petitioner made a first payment of $29
toward his 1990 income tax liability.
In March 1996, petitioner entered into an installment
agreement to pay his 1990 income tax liability.3 The terms of
this agreement required that petitioner make 39 payments of $72
toward his 1990 tax liability. From March 29, 1996, to June 25,
1999, petitioner made 39 payments of $72. In total, petitioner
paid $3,823 toward his 1990 income tax liability.
On July 14, 1999, respondent sent to petitioner a monthly
statement showing that the current balance on his 1990 income tax
liability was $845. A note to that statement provided: “Penalty
and interest totals are cumulative, but are not calculated to the
Due Date shown above. If a payoff total is required, please call
the telephone number shown below.” Petitioner called the
telephone number shown on that statement. Later, petitioner
contacted Insolvency Technician Molly Modin. Based on those
conversations, on July 20, 1999, petitioner sent to the Internal
Revenue Service a check for $845 which he believed to be the
remaining outstanding balance of his 1990 tax liability. On July
23, 1999, this amount was applied to petitioner’s 1990 income tax
liability.
3
The record does not contain a copy of the installment
agreement, nor does it disclose all of its relevant terms.
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On October 25, 1999, respondent assessed against petitioner
an addition to tax of $828.30 under section 6651(a). The same
day respondent sent to petitioner a notice stating that
respondent had changed his 1990 account to “correct
[petitioner’s] penalty charge and interest charges.” That
statement showed the addition to tax of $828.30 and interest due
of $3,414.37. Petitioner immediately sent a fax to Revenue
Officer Curtis Rowe. Attached to that fax were copies of monthly
statements that petitioner previously received from respondent.
Those statements were dated March 19, 1997, June 16, 1999, July
14, 1999, and August 18, 1999, respectively. In addition,
petitioner attached a copy of his statement of account dated
August 9, 1999. The monthly statements and petitioner’s
statement of account, which petitioner sent to the Revenue
officer, did not show any interest or penalties/additions to tax
owed by petitioner.
Respondent treated petitioner’s October 25, 1999, fax as an
informal request for interest abatement. On November 8, 1999,
respondent denied petitioner’s interest abatement request.
On November 17, 1999, petitioner appealed respondent’s
determination not to abate all of the interest and additions to
tax assessed against him with respect to his 1990 income tax
liability.
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On June 15, 2000, petitioner submitted to respondent a Form
843, Claim for Refund and Request for Abatement, requesting an
abatement of all interest and additions to tax assessed against
him for 1990. The Appeals Officer Vicki Olsen reviewed
petitioner’s claim and determined that petitioner is entitled to
abatement of interest by $1,707. The abatement was relating to
the interest accrued from January 15, 1996, to October 25, 1999.
OPINION
A. Burden of Proof
Petitioner bears the burden of proving that respondent
abused his discretion by not having abated interest against
petitioner. Rule 142(a); Lee v. Commissioner, 113 T.C. 145, 149
(1999); Woodral v. Commissioner, 112 T.C. 19, 23 (1999). As will
be shown in the discussion below, petitioner failed to establish
that respondent abused his discretion by denying petitioner’s
interest abatement claim. Therefore, petitioner failed to meet
his burden of proof.
B. Interest Abatement
As in effect for the taxable year in issue, section
6404(e)(1)4 provides that the Secretary may abate all or any part
4
Sec. 6404(e) was amended by Congress in 1996 to permit
abatement of interest for “unreasonable” error and delay in
performing a “ministerial or managerial” act. Taxpayer Bill of
Rights 2, Pub. L. 104-168, sec. 301(a), 110 Stat. 1457 (1996).
The amendment applies to taxable years beginning after July 30,
1996, and therefore does not apply to this case.
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of an assessment of interest on any deficiency or payment of tax
if either: (A) The deficiency is 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 error or delay in
payment of tax is attributable to such officer or employee being
erroneous or dilatory in performing a ministerial act.
For purposes of section 6404(e)(1), a "ministerial act" is 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. Lee v.
Commissioner, supra at 150; sec. 301.6404-2T(b)(1), Temporary
Proced. & Admin. Regs., 52 Fed. Reg. 30163 (Aug. 13, 1987).
This Court has jurisdiction to order an abatement of
interest only when the Commissioner has abused his discretion in
refusing a taxpayer's request to abate interest. Sec. 6404(g).
In order for a taxpayer to show an abuse of discretion, he or she
must establish that the Commissioner exercised his discretion
arbitrarily, capriciously, or without sound basis in fact or law.
See Rule 142(a); Lee v. Commissioner, supra at 149; Woodral v.
Commissioner, supra at 23.
Subject to other requirements not applicable in this case,
under section 6404(e) a taxpayer is entitled to an abatement of
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assessed interest on a deficiency only for any period “after the
Internal Revenue Service has contacted the taxpayer in writing
with respect to such deficiency”. Sec. 6404(e)(1). Respondent
contacted petitioner in writing with respect to petitioner’s 1990
income tax deficiency on January 15, 1996, when he sent to
petitioner the first erroneous monthly statement. Respondent
then corrected his mistake on October 25, 1999.
Respondent’s denial of petitioner’s claim to abate interest
is supported by the overly broad scope of petitioner’s claims.
See Donovan v. Commissioner, T.C. Memo. 2000-220. Petitioner
argues that he is entitled to the abatement of interest that
accrued on his 1990 tax deficiency before January 15, 1996, and
after October 25, 1999, because: (1) Respondent erred in
computing his 1990 tax liability when he entered into an
installment agreement in 1996; (2) his installment payments
should have been larger or the period of his installment
agreement should have been longer; (3) respondent erroneously
released a tax lien against his property; (4) respondent gave him
an incorrect payoff balance and statement of account; and (5) a
payment made on his 1992 tax liability should have been applied
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against his 1990 tax liability.5 We disagree with petitioner
that he is entitled to his requested interest abatement.
Section 6404(e) requires not only the identification of an
error or delay caused by a ministerial act on the Commissioner’s
part, but the identification of a specific period of time over
which interest should be abated as a result of the error or
delay. See, e.g., Krugman v. Commissioner, 112 T.C. 230 (1999);
Douponce v. Commissioner, T.C. Memo. 1999-398. In his interest
abatement claim, petitioner failed to show a correlation between
the errors he alleged and any specific period of time. Instead,
he requested the abatement of “any and all” interest accrued on
his 1990 income tax deficiency.6
Respondent has the authority to abate interest accrued as a
result of a ministerial error or delay by his employees only if
5
In reaching a decision under the abuse of discretion
standard, the Court focuses on arguments and information
available to respondent at the time his discretion was exercised.
Sego v. Commissioner, 114 T.C. 604, 612 (2000); Donovan v
Commissioner, T.C. Memo. 2000-220. Because petitioner did not
present his fifth argument in the interest abatement claim, we do
not address that argument.
6
In this regard, we understand petitioner also to be
asserting that he is liable for none of the interest because it
relates to an addition to tax that respondent assessed after the
applicable period of limitations under sec. 6501. As we have
found, the addition to tax was assessed initially on Nov. 18,
1991 (approximately 1 month after petitioner filed his related
return), abated on Aug. 14, 1995, and then reassessed on Oct. 25,
1999. Petitioner’s assertion, which focuses on the applicability
of the addition to tax, is not an appropriate consideration in
this interest abatement proceeding.
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no significant aspect of such error or delay can be attributed to
the taxpayer involved. Hawksley v. Commissioner, T.C. Memo.
2000-354; Donovan v. Commissioner, supra; sec. 6404(e)(1); sec.
301.6404-2T(a)(2), Temporary Proced. & Admin. Regs., 52 Fed. Reg.
30163 (Aug. 13, 1987). Respondent does not have authority to
abate interest where, as here, the taxpayer contributed
significantly to the accrual of that interest. The interest
accrued on petitioner’s 1990 income tax deficiency prior to
January 15, 1996, and after October 25, 1999, was the result of
petitioner’s own actions and/or inactions. Petitioner failed to
file timely his 1990 income tax return. Not a single payment was
made by petitioner toward his 1990 income tax liability until
January 26, 1996. Petitioner further failed to make any payments
toward his 1990 income tax liability since October 25, 1999, when
he was given a notice of the outstanding balance. Petitioner is
responsible for the interest.
Petitioner further failed to identify a single ministerial
error or delay by respondent that resulted in the accrual of
interest on his 1990 income tax deficiency before January 15,
1996, and after October 25, 1999. Consequently, respondent had
no authority to abate any part of the interest petitioner seeks
to have abated. By refusing to do what he had no authority to
do, respondent did not abuse his discretion. Woodral v.
Commissioner, 112 T.C. at 25.
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On the basis of our analysis, we hold that respondent’s
denial of petitioner’s claim for abatement of interest was not an
abuse of discretion.
To reflect the foregoing,
Decision will be entered
for respondent.