T.C. Memo. 2003-238
UNITED STATES TAX COURT
LAWRENCE S. AHMAOGAK AND MYRNA AHMAOGAK, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10850-01. Filed August 11, 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
large part petitioners’ request to abate interest on their
Federal income tax liabilities for 1986 through 1989, inclusive,
and 1991 (the underlying years). In response to that notice,
petitioners timely petitioned this Court to review 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’ Federal income tax liabilities for the
underlying years 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 summarized below.
Petitioners are husband and wife. They filed timely joint
Federal income tax returns for 1987, 1988, and 1989, but untimely
returns for 1986 and 1991.3
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 returns have not been included in the record.
Details of the returns 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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For convenience, only some of the details of the assessment
process for the underlying years are set forth in the body of
this opinion; additional details are contained in the Appendix.
By letter dated September 12, 1988, respondent notified
petitioners that their 1986 return was under examination. That
return was selected for examination because of deductions claimed
for the donation of whale meat and whaling expenses. The initial
interview with the petitioners took place on October 20, 1988.
On or around November 1, 1988, the examination was extended to
include petitioners’ 1987 return, on which similar deductions
were claimed. An examination report proposing to disallow the
above-referenced deductions (presumably for both years) was
mailed to petitioners on February 8, 1989. Petitioners’ protest
was received on July 3, 1989, and an Appeals officer was assigned
2 weeks later. On August 1, 1989, the Appeals officer scheduled
a conference with petitioners’ representative. During Appeals
consideration, much correspondence was exchanged, and several
conferences took place. On June 14, 1991, respondent’s Appeals
Office issued a notice of deficiency to petitioners in which
deficiencies in their 1986 and 1987 income taxes were determined.
Petitioners timely petitioned this Court in response to that
notice on September 16, 1991 (docket No. 20784-91). That
docketed case was set for trial but was continued several times.
Ultimately, a stipulated decision was entered on February 29,
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2000, and the deficiencies, an addition to tax, and interest were
assessed on May 29, 2000.
The examination, Appeals consideration, and litigation
phases for the years 1988, 1989, and 1991 progressed in a manner
similar to that for the years 1986 and 1987. For each of these
later years, deductions similar to the those claimed and
disallowed for 1986 and 1987 were also claimed and disallowed.
However, by the time the examination of 1991 was completed,
petitioners had decided to forgo Appeals consideration and
proceed with a test case before this Court.
As of July 28, 1994, petitioners had three cases docketed in
this Court (the docketed cases).4 The docketed cases were
consolidated with other cases involving similarly situated
taxpayers. At petitioners’ request, the docketed cases were held
in suspense to allow for the enactment of proposed Federal
legislation that specifically addressed the types of deductions
in dispute in those cases. Although the proposed legislation was
never enacted, petitioners and respondent agreed to a settlement
in each of the docketed cases, the terms of which are consistent
with the relief contemplated by the proposed legislation.
4
Docket No. 20784-91, filed Sept. 16, 1991, involving 1986
and 1987; docket No. 23983-92, filed Oct. 27, 1992, involving
1988 and 1989; and docket No. 13503-94, filed July 28, 1994,
involving 1991.
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On May 29, 2000, consistent with the stipulated decision
document entered in each of the docketed cases, deficiencies,
additions to tax, and interest in the following amounts were
assessed:
Year Deficiency Sec. 6651(a) Interest
1986 $ 7,253.00 $147.80 $16,578.00
1987 23,488.00 — 45,545.88
1988 14,044.00 — 22,934.40
1989 5,753.00 — 7,776.27
1991 3,001.12 718.57 3,382.33
On June 27, 2000, respondent received from petitioners a
separate Form 843, Claim for Refund and Request for Abatement,
for each of the underlying years (the abatement claims). Block 5
of the abatement claims 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 space below these instructions on
each of the abatement claims, petitioners inserted the following:
Our 1986 [1987, 1988, 1989, or 1991, as appropriate]
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
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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 unfair treatment and impose on us an undue
hardship.
On the abatement claims, petitioners requested abatement of
interest as follows:
Year Period Approximate Amount
1986 02/02/1989 — 10/1999 $13,300
1987 02/02/1989 — 10/1999 25,000
1988 12/16/1991 — 10/1999 16,700
1989 06/10/1991 — 10/1999 10,000
1991 09/13/1993 — 10/1999 2,500
By letter dated January 24, 2001, respondent notified
petitioner that for 1986 and 1987, $295.43 of interest that
accrued from June 8 to July 3, 1989, would be abated, but
otherwise denied each of petitioners’ requests for abatement of
interest. The reason for the partial allowance has not been
provided. By letter dated February 23, 2001, petitioners
requested that respondent’s Appeals Office reconsider the portion
of the abatement claims that had been denied. On February 28,
2001, respondent issued a notice of final determination in which
respondent refused, with the exception previously noted, to abate
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interest on petitioners’ Federal income tax liabilities for the
underlying years.
Discussion
In general, interest on a Federal income tax liability
begins to accrue on the due date of the return and continues to
accrue, compounding daily, until payment is made. 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
performing a ministerial act. Sec. 6404(e)(1).5 A ministerial
act means a procedural or mechanical act that does not involve
the exercise of judgment. Lee v. Commissioner, 113 T.C. 145,
149-150 (1999); sec. 301.6404-2T, Temporary Proced. & Admin.
Regs., 52 Fed. Reg. 30163 (Aug. 13, 1987). A prerequisite to the
relief contemplated by section 6404(e) is the “erroneous or
dilatory performance of a ministerial act” by the Commissioner’s
5
Sec. 6404(e) was amended by the Taxpayer Bill of Rights
2, Pub. L. 104-168, sec. 301, 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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employee that results in the accrual of interest the taxpayer
seeks to have abated.
In the abatement claims, petitioners state that they have a
good faith belief that delays occurred in preforming ministerial
acts, but they have failed to identify a single instance of
respondent’s dilatory performance of a ministerial act, and
respondent has not admitted to any. Instead, petitioners offered
the following in their opening brief:
While petitioners believed, and still believe, that a
deduction was probably claimable under existing law,
attempts were made to clarify the situation by
requesting retroactive legislation in Congress. There
was substantial interest in this legislation which made
it through numerous committee layers at various times.
However, the legislation failed to pass prior to this
matter being finally set for trial. After careful
reconsideration of the matter, the Respondent agreed
that some charitable deductions were proper and the
underlying tax liability was settled. However, due to
the delay in waiting for legislation, a delay caused by
an illness and death of a close family member of
Petitioners’ counsel, and other factors as noted in the
stipulated agreed facts, substantial interest was
imposed.
The above-quoted passage, as well as the statements
contained in the abatement claims, greatly undermines
petitioners’ claim to section 6404(e) relief. We have reviewed
the examination history (including Appeals consideration and
litigation phases) of petitioners’ Federal income tax returns for
the underlying years as set forth in the Appeals officer’s
chronology of events and, with the exception of the duration of
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the docketed cases, find nothing out of the ordinary in either
the sequence of events or the passage of time between events.
Moreover, petitioners acknowledge, as evidenced by the above-
quoted passages, that the length of time that the docketed cases
were pending is not attributable to the erroneous or dilatory
performance of a ministerial act by respondent’s employee. See
Lee v. Commissioner, supra.
Resolution of the docketed cases was obviously delayed to
allow for the enactment of the proposed legislation, and the
delay resulted in the imposition of interest. We are not
unsympathetic to petitioners’ situation and the frustration that
must have followed their failed attempts to resolve their tax
disputes through legislation long promised but never enacted.
Nevertheless, under the circumstances, the additional interest
that accrued during the period of delay of the docketed cases is
not subject to abatement under section 6404(e). Simply put, the
interest that accrued on petitioners’ Federal income tax
liabilities for the underlying years results from petitioners’
failure to pay their Federal income tax liability for each year
when due. Section 6404(e) does not authorize the abatement of
interest upon that ground, and respondent’s refusal to do so is
not an abuse of discretion. See Donovan v. Commissioner, T.C.
Memo. 2000-220; Douponce v. Commissioner, T.C. Memo. 1999-398.
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To reflect the foregoing,
Decision will be
entered for respondent.
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APPENDIX
EVENT DATE OF EVENT
Docket No. 20784-91 Docket No. 23983-92 Docket No. 13503-94
1986 1987 1988 1989 1991
Filed Federal income tax
09/04/87 Timely Timely Timely 04/14/93
returns
Commenced examination 09/12/88 11/01/88 03/28/91 02/15/91 09/13/93
Initial interview 10/20/88 unknown unknown 03/08/91 unknown
Prepared Report
Transmittal, Reviewed and 02/28/89 02/28/89 unknown unknown unknown
Approved for Appeals
Received petitioners'
Written Protest for an 07/03/89 07/03/89 02/11/92 02/11/92 08/01/94
Appeals Conference
Appeals officer assigned 07/18/89 07/18/89 unknown unknown 09/29/94
Scheduled Appeals
08/01/89 08/01/89 03/04/92 03/04/92 09/30/94
conference
Held Appeals conference 10/31/89 10/31/89 04/28/92 04/28/92 unknown
Respondent mailed
04/10/91 04/10/91 unknown unknown unknown
settlement offer
Petitioners rejected
05/28/91 05/28/91 07/16/92 07/16/92 unknown
settlement offer
Issued Notice of Deficiency 06/14/91 06/14/91 07/30/92 07/30/92 04/29/94
Filed Petition 09/16/91 09/16/91 10/27/92 10/27/92 07/28/94
Petitioner filed status
report with Tax Court on 06/08/94 06/08/94 06/08/94 06/08/94 06/08/94
proposed legislation
Reconsidered settlement 06/13/94 06/13/94 06/13/94 06/13/94 n/a
Respondent filed status
report with Tax Court on 01/27/95 01/27/95 01/27/95 01/27/95 01/27/95
proposed legislation
Respondent filed second
status report with Tax
09/26/97 09/26/97 09/26/97 09/26/97 09/26/97
Court on proposed
legislation
Petitioner filed second
status report with Tax
12/02/98 12/02/98 12/02/98 12/02/98 12/02/98
Court on proposed
legislation
Settlement conference with
09/02/99 09/02/99 09/02/99 09/02/99 09/02/99
Appeals
Stipulated decision entered
02/29/00 02/29/00 02/29/00 02/29/00 02/29/00
by Tax Court
Assessment of tax,
05/29/00 05/29/00 05/29/00 05/29/00 05/29/00
penalties, and interest