T.C. Memo. 2003-220
UNITED STATES TAX COURT
GEORGE N. AHMAOGAK AND MAGGIE AHMAOGAK, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10849-01. Filed July 23, 2003.
Mason D. Morisset, for petitioners.
Lisa M. Oshiro, for respondent.
MEMORANDUM OPINION
DAWSON, Judge: This case was assigned to Special Trial
Judge Lewis R. Carluzzo pursuant to section 7443A(b)(5) and Rules
180, 181 and 183.1 The Court agrees with and adopts the opinion
of the Special Trial Judge, which is set forth below.
1
Unless otherwise indicated, section references are to the
Internal Revenue Code of 1986, as amended. Rule references are
to the Tax Court Rules of Practice and Procedure.
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OPINION OF THE SPECIAL TRIAL JUDGE
CARLUZZO, Special Trial Judge: On February 28, 2001,
respondent issued a notice of final determination denying in part
petitioners’ request to abate interest on their 1989 Federal
income tax liability. In response to that notice, petitioners
timely petitioned this Court for a review of respondent’s denial.
Our jurisdiction is established by section 6404(h).2 The issue
for decision is whether respondent’s failure to abate interest on
petitioners’ 1989 Federal income tax liability is an abuse of
discretion.
Background
Petitioners resided in Barrow, Alaska, at the time the
petition was filed. The facts in this case, all of which have
been stipulated, are easily summarized.
Petitioners are husband and wife. They filed a timely joint
1989 Federal income tax return.3 Computational errors were made
on the return, and as a result the total tax liability reported
on the return was understated. A notice was sent to petitioners
2
Sec. 6404(h) was previously designated sec. 6404(i). See
Victims of Terrorism Tax Relief Act of 2001, Pub. L. 107-134,
sec. 112(d)(1)(B), 115 Stat. 2435.
3
The return has not been included in the record. Details
of the return are set forth in a document prepared by
respondent’s Appeals officer in response to petitioners’
administrative claim for interest abatement. The parties
stipulated the truth of the factual portions of this document.
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explaining the error and advising them they owed an additional
$1,387.25, including interest of $35.08.
On May 29, 1991, respondent first notified petitioners that
their 1989 return had been selected for examination. At the
time, petitioners resided in Barrow, Alaska, and the revenue
agent assigned to the examination was located in Fairbanks,
Alaska. We cannot determine whether petitioners or anyone acting
on their behalf met with the revenue agent during the
examination. Because of the distance between petitioners’
residence and the revenue agent’s post of duty, there might have
been some logistical complications in scheduling meetings, and
there appear to have been some delays in the receipt of
correspondence mailed between petitioners and the revenue agent.
The revenue agent’s report was mailed to petitioners on
December 16, 1991.4 Having received no protest to the revenue
agent’s report by March 18, 1992, respondent began the process of
preparing a notice of deficiency that was mailed to petitioners
on March 23, 1992. In that notice of deficiency respondent
determined a deficiency of $7,475 in petitioners’ 1989 Federal
4
This date is erroneously listed as “December 16, 1992” in
the chronology of events prepared by the Appeals officer.
Although an obvious error, petitioners make repeated references
to the event as though it actually occurred in 1992.
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income tax and imposed a section 6662(a) penalty of $1,495.5
The deficiency apparently results from, or is largely
attributable to, the disallowance of a claimed charitable
contribution deduction for the donation of whale meat to certain
native Alaskan tribal communities and the disallowance of
deductions for expenses incurred in connection with whaling
activity.
On August 17, 1992, the deficiency and penalty were
assessed, as was interest of $2,348.31.
On February 1, 1993, an untimely petition was filed with
this Court (docket No. 2198-93) in response to the above-
referenced notice of deficiency. Because the petition was not
filed within the period prescribed by section 6213(a), upon
respondent’s motion that case was dismissed for lack of
jurisdiction on that ground on April 13, 1993.
Including tax, additions to tax, penalties, and interest, as
of March 26, 1993, all but $8.61 of petitioners’ 1989 liability
had been paid. Because this amount is what respondent refers to
as “below tolerance”, respondent did not issue a notice and
demand for the $8.61.
5
A copy of the notice of deficiency has not been included
in the record, but it appears that in that notice respondent also
determined a deficiency in petitioners’ 1988 Federal income tax.
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On March 29, 1995, respondent received an amended 1989
Federal income tax return from petitioners. The amended return
has not been included in the record, but apparently the
deductions previously claimed and disallowed were increased,
other deductions not claimed on the original return were claimed,
and petitioners reported an income tax liability on the amended
return that was less than the income tax liability reported on
the original return. We cannot tell whether or how the amended
return was processed.
By the time the amended return was filed, petitioners and
other similarly situated taxpayers had cases pending in this
Court in which they disputed the Commissioner’s disallowances of
deductions similar to the deductions that gave rise to the
determination of petitioners’ 1989 deficiency. Furthermore,
legislation had been proposed that would have partially or fully
allowed for the types of deductions in dispute in the Tax Court
cases. These cases were held in suspense for several years
pending enactment of the legislation; however, the proposed
legislation was never enacted. The Tax Court cases were resolved
by agreement during 2000 after further settlement negotiations
with the Commissioner’s Appeals Office (the settlement position).
The settlement position was applied to petitioners’ 1990
year, which apparently had been examined before that time. As a
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result, petitioners agreed to a deficiency and a section 6662(a)
penalty totaling $3,506 for 1990.
On June 27, 2000, respondent received a payment of $3,5066
from petitioners designated to be applied to their 1989
liability. The transmittal letter with which the payment was
sent expressly references the year 1989. As a result of this
payment, interest of $15.75 ($8.61 plus $7.14 in interest that
had accrued from March 26, 1993, until July 14, 2000) was
assessed and paid, leaving petitioners’ account for that year
overpaid by $3,490.25.
At the time the above-referenced transmittal letter and
payment were received, respondent also received a Form 843, Claim
for Refund and Request for Abatement, from petitioners (the
abatement claim). Block 5 of the abatement claim is designated
“Explanation and additional claims.” Instructions following the
designation direct the taxpayer to “Explain why * * * this claim
should be allowed, and show computation of tax refund or
abatement of interest, penalty or addition to tax.” In the
designated area following these instructions on the abatement
claim, petitioners inserted the following:
6
This amount is erroneously referred to as “$4,506" in a
request for finding of fact included in respondent’s brief.
Petitioners, in their reply brief, agreed to respondent’s
erroneous request.
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Our 1989 return was audited, brought to the Appeals
Office, and in Tax Court. We have a good faith belief
that delays occurred in preforming [sic] ministerial
acts by an officer or employee of the Internal Revenue
Service during that period. The occurance [sic] of
such delays requires the abatement of the assessment of
interest for those particular periods. Furthermore,
throughout much of this period legislation was pending
which would have substantially affected the treatment
of specific deductions. Accordingly, the Service
postponed consideration of these matters. Further, a
death in the family of our legal counsel resulted in an
additional delay in consideration of our case. In
light of the ministerial delays, and as well as our
reliance on the actions of Congress, the failure to
abate interest in our circumstances would constitute
grossly unfiar [sic] treatment and impose on us an
undue hardship.
Elsewhere on the abatement claim, petitioners indicate that the
amount to be “refunded or abated” is “approximately [$]2,400”.
In the area designated “Period--prepare a separate Form 843 for
each tax period”, petitioners entered “from March 8, 1993 to
October, 1999.” Try as we have, we are unable to appreciate the
relevance of this period to the relief requested by petitioners
either in the abatement claim or in this proceeding. Block 4a of
the abatement claim provides for a check-the-box entry if the
request is for abatement or refund of “interest caused by IRS
errors or delays”. This box is left blank, as is the following
area where the “dates of payment” should have been inserted.
Despite its many infirmities, respondent considered the
abatement claim as a request for abatement of all interest that
had accrued with respect to petitioners’ 1989 Federal income tax
liability. As earlier noted, with the exception of $8.61, all of
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that interest had been paid as of March 26, 1993. By letter
dated January 24, 2001, respondent notified petitioners that
$7.14 of interest that accrued from March 26, 1993, to July 14,
2000, would be abated but denied petitioners’ request for
abatement of interest that had accrued before March 26, 1993. By
letter dated February 23, 2001, petitioners requested that
respondent’s Appeals Office reconsider the portion of their
abatement claim that had been denied. In this letter,
petitioners identify “a number of delays”, one of which
erroneously lists the date of the revenue agent’s report as
December 16, 1992, when, in fact, as noted above, the report was
issued on December 16, 1991. The letter goes on to allege that
petitioners’ abatement claim (received by respondent on June 27,
2000) “was filed * * * shortly after assessment of the interest
in this case”. As noted, with the exception of $8.61, all of the
interest that had previously accrued was assessed and paid as of
March 26, 1993. Petitioners’ use of the term “shortly” is
expansive, to say the least.
The Appeals officer assigned to the matter prepared a
detailed chronology of events relevant to the determination of
petitioners’ 1989 Federal income tax liability. Petitioners
apparently were provided a copy of this chronology before
February 23, 2001, as their letter to respondent on that date
makes reference to it. In a note included within the chronology
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the Appeals officer observes that the $3,506 payment that
respondent applied to 1989 pursuant to petitioners’ designation
is the amount agreed upon in settlement of petitioners’ 1990
Federal income tax liability. According to the Appeals officer,
“it might have been * * * [petitioners’] intent to file an
interest abatement request with respect to TY1990 rather than
TY1989". Neither party commented on this observation in any
document submitted in this proceeding.
Discussion
It appears to us that the observation of the Appeals officer
is well made. Nevertheless, taking our lead from the parties, we
ignore the possibility that this proceeding results from a
mistaken reference to 1989 and consider whether respondent’s
failure to abate some of the interest applicable to petitioners’
Federal income tax for that year is an abuse of discretion. For
the following reasons, we hold that it is not.
In general, interest on a Federal income tax liability,
including a deficiency, begins to accrue on the due date of the
return and continues to accrue, compounding daily, until payment
is made. See secs. 6601(a), 6622.
The Commissioner has the authority to abate the assessment
of interest on a deficiency or payment of income tax if the
accrual of such interest is attributable to an error or delay by
an official or employee of the Internal Revenue Service in
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performing a ministerial act. Sec. 6404(e)(1).7 A ministerial
act means a procedural or mechanical act that does not involve
the exercise of judgment. Lee v. Commissioner, 113 T.C. 145
(1999); sec. 301.6404-2T, Temporary Proced. & Admin. Regs., 52
Fed. Reg. 30163 (Aug. 13, 1987). The relief contemplated by
section 6404(e) requires the existence of some “erroneous or
dilatory performance of a ministerial act” by the Commissioner’s
employee that resulted in the interest that the taxpayer is
seeking to have abated.
In this case, petitioners state that they have a “good faith
belief that delays occurred in performing ministerial acts”, but
they have nowhere identified those ministerial acts or what
delays were caused as a result of those unidentified ministerial
acts.
We have reviewed the history of the examination of
petitioners’ 1989 Federal income tax return as set forth in the
Appeals officer’s chronology of events and find nothing out of
the ordinary in either the sequence of events or the passage of
time from event to event. Petitioners’ 1989 Federal income tax
7
Sec. 6404(e) was amended by sec. 301 of the Taxpayer Bill
of Rights 2, Pub. L. 104-168, 110 Stat. 1457 (1996), to permit
the Commissioner to abate interest with respect to an
“unreasonable” error or delay resulting from “managerial” or
ministerial acts. The amendment is effective for interest
accruing with respect to deficiencies or payments for tax years
beginning after July 30, 1996, and is therefore inapplicable
here.
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return was timely filed and selected for examination
approximately 1 year later. Approximately 7 months later the
revenue agent’s report was issued proposing adjustments similar
to those made in other years. Less than a year after the return
had been selected for examination, and within months of the
issuance of the revenue agent’s report, respondent issued a
notice of deficiency determining a deficiency in petitioners’
1989 Federal income tax.8 Petitioners failed to timely petition
this Court in response to that notice, and the deficiency, a
penalty, an addition to tax, and interest were appropriately
assessed. We find no delay in the assessment process as outlined
above, much less any dilatory or erroneous act by respondent’s
employee in performing a ministerial act that caused any delay.
The interest that accrued on petitioners’ 1989 Federal
income tax liability resulted from petitioners’ failure to pay
their 1989 Federal income tax liability when due. Section
6404(e) does not authorize the abatement of interest upon that
ground, and respondent’s refusal to grant such an abatement is
not an abuse of discretion. See Donovan v. Commissioner, T.C.
Memo. 2000-220; Douponce v. Commissioner, T.C. Memo. 1999-398.
8
We note that an “unreasonable 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 a ground
for abatement of interest under sec. 6404(e), see H. Rept. 99-
426, at 845 (1985), 1986-3 C.B. (Vol. 2) 1, 845, but there was no
such delay in this case.
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To reflect the foregoing,
Decision will be
entered for respondent.