T.C. Memo. 2007-104
UNITED STATES TAX COURT
TAN XUAN BUI, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3233-06. Filed April 30, 2007.
Warren Nemiroff, for petitioner.
Guy H. Glaser, for respondent.
MEMORANDUM OPINION
MARVEL, Judge: This case is before the Court on
respondent’s motion for summary judgment, filed pursuant to Rule
121.1
1
All Rule references are to the Tax Court Rules of Practice
and Procedure, and all section references are to the Internal
Revenue Code.
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Background
This case involves an appeal from respondent’s determination
that petitioner is not entitled to an abatement of interest under
section 6404(e)(1). When the petition in this case was filed,
petitioner resided in Fountain Valley, California.
Petitioner timely filed his 1997 and 1998 Federal income tax
returns. Respondent selected the returns for examination. After
examining the returns, respondent concluded that petitioner had
unreported income and had improperly deducted travel expenses.
Accordingly, on March 21, 2001, respondent issued a notice of
deficiency to petitioner in which he determined deficiencies of
$48,206 and $11,672 for 1997 and 1998, respectively.
Additionally, respondent determined that petitioner was liable
for penalties under section 6662(a) of $9,513.40 and $2,224 for
1997 and 1998, respectively.
On June 11, 2001, petitioner filed a petition seeking a
redetermination of the deficiencies and penalties set forth in
the notice of deficiency. Trial was set for January 28, 2002.
On February 1, 2002, a decision reflecting a settlement between
petitioner and respondent (settlement) was entered by the Court.
Under the terms of the settlement, respondent conceded the
deduction for travel expenses, and petitioner conceded the
unreported income and the section 6662(a) penalties. The
decision contained a stipulation that interest would be assessed
on the deficiencies and penalties due from petitioner as required
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by law.
On August 6, 2002, petitioner submitted a Form 656, Offer in
Compromise, to respondent based on doubt as to liability in which
petitioner offered to pay the deficiencies but not any penalties
or statutory interest. On September 18, 2003, respondent sent
petitioner a letter rejecting the offer.
On February 6, 2005, petitioner submitted a Form 843, Claim
for Refund and Request for Abatement (request), with respect to
the section 6662(a) penalties and the accrued interest. On
August 31, 2005, respondent sent a letter to petitioner stating
that respondent would not review the portion of the request
relating to the abatement of the assessed penalties. On October
17, 2005, respondent sent petitioner a 30-day letter stating that
petitioner’s request had been denied on the grounds that “There
was no unreasonable error or delay relating to the performance of
a ministerial or managerial act in processing the examination of
your return.” Petitioner did not respond to the 30-day letter.
On a date that cannot be ascertained precisely from the record,
but which the parties allege was either December 1 or December 5,
2005, respondent issued a notice of final determination denying
petitioner’s request under section 6404(e)(1).
On February 13, 2006, petitioner timely filed a petition
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under section 6404(h)2 seeking review of respondent’s
determination. Petitioner asserted that the manner in which
respondent conducted his examination prevented petitioner from
divulging information relating to his tax liability.3 Petitioner
argued that if he had trusted respondent and had felt comfortable
in disclosing the necessary information, petitioner would have
settled his case years ago without penalties and with far less
accrued interest.
On August 10, 2006, respondent’s motion for summary judgment
was filed. In his motion, respondent asserts that the Court does
not have jurisdiction under section 6404(h) to decide whether
respondent properly assessed the section 6662(a) penalties.
Respondent also argues that petitioner failed to produce evidence
that respondent was unreasonably dilatory in performing a
ministerial or managerial act as required by section 6404(e)(1).
Respondent urges us to sustain respondent’s determination denying
petitioner’s request.
On September 8, 2006, petitioner’s response opposing
2
Sec. 6404 was amended by the Internal Revenue Service
Restructuring and Reform Act of 1998, Pub. L. 105-206, sec.
3305(a), 112 Stat. 743. One of the changes redesignated former
sec. 6404(g) as sec. 6404(h), effective for tax years ending
after July 22, 1998.
3
Petitioner chose not to disclose information because he
feared that disclosure of the information would cause various
members of his family to be audited.
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respondent’s motion was filed. Petitioner concedes the section
6662(a) penalties4 but maintains that the request was improperly
denied with respect to interest. Petitioner also argues that the
manner in which respondent conducted his examination unreasonably
delayed the settlement of petitioner’s case and prolonged the
period during which interest accrued. Petitioner asserts that
his testimony at trial would establish the impropriety of the
audit conducted by respondent, but petitioner did not submit an
affidavit in support of his position in opposition to
respondent’s motion.
On February 5, 2007, the Court held a hearing on
respondent’s summary judgment motion. Representatives for both
parties were present and were heard.
Discussion
I. Summary Judgment
Summary judgment is a procedure designed to expedite
litigation and avoid unnecessary, time-consuming, and expensive
trials. Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681
(1988). Summary judgment may be granted with respect to all or
any part of the legal issues presented “if the pleadings, answers
to interrogatories, depositions, admissions, and any other
acceptable materials, together with the affidavits, if any, show
4
In his opposition to the motion for summary judgment,
petitioner explicitly states that he will not contest the
imposition of the sec. 6662(a) penalties.
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that there is no genuine issue as to any material fact and that a
decision may be rendered as a matter of law.” Rule 121(a) and
(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992),
affd. 17 F.3d 965 (7th Cir. 1994); Zaentz v. Commissioner, 90
T.C. 753, 754 (1988). The moving party bears the burden of
proving that there is no genuine issue of material fact, and
factual inferences will be drawn in a manner most favorable to
the party opposing summary judgment. Dahlstrom v. Commissioner,
85 T.C. 812, 821 (1985); Jacklin v. Commissioner, 79 T.C. 340,
344 (1982). The nonmoving party, however, cannot rest upon the
allegations or denials in his pleadings but must “set forth
specific facts showing that there is a genuine issue for trial.”
Rule 121(d); Dahlstrom v. Commissioner, supra at 820-821.
II. Abatement of Interest Under Section 6404(e)(1)
Under section 6404(e)(1), the Commissioner may abate part or
all of an assessment of interest on any deficiency to the extent
that any unreasonable error or delay in payment is attributable
to erroneous or dilatory performance of a ministerial or
managerial act by an officer or employee of the Internal Revenue
Service. 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 reviews by
supervisors, have taken place. Lee v. Commissioner, 113 T.C.
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145, 150 (1999); sec. 301.6404-2(b)(2), Proced. & Admin. Regs. A
managerial act is an administrative act that involves a temporary
or permanent loss of records or the exercise of judgment or
discretion relating to management of personnel during the
processing of a taxpayer’s case. Sec. 301.6404-2(b)(1), Proced.
& Admin. Regs. A decision concerning the proper application of
Federal tax law is neither a ministerial nor a managerial act.
Sec. 301.6404-2(b)(1) and (2), Proced. & Admin. Regs. A request
for an abatement of interest will not be granted if a significant
aspect of the delay is attributable to the taxpayer. Sec.
6404(e)(1).
When Congress enacted section 6404(e), it did not intend the
provision to be used routinely to avoid payment of interest.
Rather, Congress authorized abatement of interest only where
failure to do so “would be widely perceived as grossly unfair.”
H. Rept. 99-426, at 844 (1985), 1986-3 C.B. (Vol. 2) 1, 844; S.
Rept. 99-313, at 208 (1986), 1986-3 C.B. (Vol. 3) 1, 208. Under
section 6404(h)(1), we have jurisdiction to determine whether
respondent abused his discretion in denying petitioner’s request.
Because the Commissioner’s abatement authority involves the
exercise of discretion, however, we must give due deference to
the Commissioner’s determination. Woodral v. Commissioner, 112
T.C. 19, 23 (1999); Mailman v. Commissioner, 91 T.C. 1079, 1082
(1988). In order to prevail, petitioner must prove that
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respondent abused his discretion by exercising it arbitrarily,
capriciously, or without sound basis in fact or law. Woodral v.
Commissioner, supra at 23; Mailman v. Commissioner, supra at
1084; see also sec. 6404(h)(1); Rule 142(a).
In his response in opposition to respondent’s motion,
petitioner asserted that he was the subject of an abusive,
duplicitous, bad faith, and racist audit conducted to intimidate
him and to discover assets belonging to his family. However,
petitioner did not set forth specific facts in or attach any
documents to his response that showed a genuine issue of material
fact for trial. Instead, petitioner rested on the allegations in
his petition and in his response. Such allegations are simply
not enough to withstand a motion for summary judgment. See Rule
121(d).
Petitioner’s factual assertions do not establish that there
is any dispute about a material fact in this interest abatement
proceeding. At best, petitioner’s allegations reflect a concern
that his audit was improperly motivated. However, petitioner
does not make any allegation of improper motivation regarding
respondent’s attempt to collect interest. In fact, petitioner
agreed to the deficiency and stipulated that interest would be
assessed on the deficiency. Petitioner has not alleged any facts
to support a finding of unreasonable error or delay in payment
that is attributable to an officer or employee of respondent’s
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being erroneous or dilatory in performing a ministerial or
managerial act. On the contrary, the record indicates that any
delay that may have occurred was attributable to petitioner.5
Section 6404(e)(1) prohibits abatement of interest if a
significant aspect of the error or delay is attributable to the
taxpayer.
Finally, petitioner cannot successfully argue that
respondent’s action enforcing the terms of the settlement between
petitioner and respondent was an abuse of discretion. The
decision resolving petitioner’s deficiency case included the
parties’ stipulation acknowledging that statutory interest would
be assessed on both the deficiencies and penalties for the years
at issue as required by law. See sec. 6601(a), (e)(2).
Respondent assessed interest in accordance with the stipulation
of the parties. Petitioner has failed to demonstrate that there
5
Petitioner, who was represented by both a tax attorney and
a certified public accountant, failed to cooperate with
respondent during the audit in that petitioner refused to provide
information requested by respondent.
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is a genuine issue as to any material fact or that respondent is
not entitled to a decision as a matter of law.6
III. Conclusion
We shall grant respondent’s summary judgment motion with
respect to petitioner’s abatement claim under section 6404(e)(1).
To reflect the foregoing,
An appropriate order and
decision will be entered.
6
Petitioner’s claim that the settlement in his deficiency
case does not speak to the issue of interest is remarkably
disingenuous given the clarity of the language used in the
decision: “It is further stipulated that interest will be
assessed as provided by law on the deficiencies and penalties due
from the petitioner.”
Tan Xuan Bui v. Comm'r
Court: United States Tax Court
Date filed: 2007-04-30
Citations: 2007 T.C. Memo. 104, 93 T.C.M. 1163, 2007 Tax Ct. Memo LEXIS 111
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