T.C. Memo. 2008-180
UNITED STATES TAX COURT
THOMAS CHRISTOPHER BROOME, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 7259-05. Filed July 30, 2008.
Thomas Christopher Broome, pro se.
John F. Driscoll, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
VASQUEZ, Judge: On October 18, 2004, respondent issued a
notice of final determination disallowing petitioner’s request
for abatement of interest on income tax liabilities for 1994 and
1995. The sole issue for decision is whether respondent’s
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decision pursuant to section 64041 not to abate assessments of
interest relating to petitioner’s 1994 and 1995 taxable years was
an abuse of discretion.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. At the time he filed the
petition, petitioner resided in Mississippi.
Petitioner was one of two shareholders in T.C. Broome
Construction Co., Inc. (Broome Construction), an S corporation.
Petitioner owned 60 percent of Broome Construction. Petitioner
filed his 1994 and 1995 Federal income tax returns on October 18,
1995 and 1996, respectively. The Internal Revenue Service (IRS)
audited Broome Construction’s returns for the 1994, 1995, and
1996 taxable years in April 1997. The audit included a review of
petitioner’s 1994, 1995, and 1996 returns. On or about February
13, 1998, the examining agent sent a proposed final examination
report to petitioner regarding his 1994, 1995, and 1996 returns.
Petitioner filed a request for consideration with the IRS
Office of Appeals on or about April 6, 1998. On April 14, 1998,
petitioner signed a Form 872, Consent to Extend the Time to
1
All section references are to the Internal Revenue Code
in effect for the years in issue unless otherwise indicated, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
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Assess Tax, which extended the period to assess tax for 1994
until April 15, 1999. Appeals Officer Penny Young (Ms. Young)
received the case on June 5, 1998.
Ms. Young worked on the case for 2 years and experienced
some delay in processing the appeal. One delay resulted from a
tropical storm in the area. Ms. Young had to travel from New
Orleans, Louisiana, to Mobile, Alabama, to meet with petitioner
and his representatives regarding the determinations. Therefore,
the meetings occurred roughly every few months. On at least one
occasion petitioner’s representatives’ failure to attend the
meeting resulted in rescheduling. The longest delay resulted
from waiting for records to be sent from petitioner and his
representatives to Ms. Young so she could process petitioner’s
appeal.
As a result of the delays Ms. Young requested three more
Forms 872 while processing petitioner’s appeal. Petitioner
signed his second Form 872 on December 28, 1998, extending the
period to assess tax for 1994 until December 31, 1999.
Petitioner’s representative signed the third Form 872 on July 29,
1999, extending the period to assess tax for 1994 and 1995 until
April 15, 2000. Petitioner signed the fourth and final Form 872
on January 26, 2000, extending the period to assess tax for 1994
and 1995 until June 30, 2000. Ms. Young mailed the last Form 872
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to petitioner before December 31, 1999, but did not receive the
signed Form 872 back until January of 2000.
In January 2000 petitioner and respondent reached a
tentative settlement agreement for which settlement documents
were prepared. Petitioner signed a Form 870-AD, Offer to Waive
Restrictions on Assessment and Collection of Tax Deficiency and
to Accept Overassessment, with respect to his personal income tax
liability determination for taxable years 1994 and 1995 on
January 26, 2000. Ms. Young received the signed Form 870-AD on
February 17, 2000. Respondent’s review of the Form 870-AD
concluded in March 2000, and respondent officially closed
petitioner’s case.
Respondent assessed the deficiencies for 1994 and 1995 on
May 12, 2000. On April 15, 2001, respondent credited
overpayments from 1998, 1999, and 2000 to petitioner’s balance
for 1994 and 1995 resulting from the assessment of deficiencies.
Thereafter, petitioner’s outstanding balance was zero.
On April 14, 2002, petitioner filed a Form 843, Claim for
Refund and Request for Abatement, for his taxable years 1994,
1995, and 1996. Respondent did not act on this request for
abatement of interest. Petitioner filed another Form 843 on
April 17, 2003. In June of 2004 respondent assigned IRS Examiner
Patricia Wood (Ms. Wood) to review the request petitioner filed
on April 17, 2003. Ms. Wood reviewed petitioner’s April 2003
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request for abatement of interest, and respondent issued an IRS
Letter 2289(DO) tentatively denying the April 2003 request on
August 17, 2004. Petitioner failed to respond to the IRS Letter
2289(DO), and respondent issued a final determination letter on
October 18, 2004.
OPINION
I. Section 6404(e)
Pursuant to section 6404(e)(1), the Commissioner may abate
the assessment of interest in two situations: (1) When a
deficiency is attributable to an error or delay by an officer or
employee of the IRS in performing a ministerial act, or (2) when
interest is assessed on any payment of certain taxes (including
income tax) to the extent that an error or delay in such payment
is attributable to an officer or employee of the IRS being
erroneous or dilatory in performing a ministerial act.2 An error
or delay by an officer or employee of the IRS 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 IRS has
2
In 1996, sec. 6404(e) was amended by the Taxpayer Bill of
Rights 2, Pub. L. 104-168, sec. 301(a), 110 Stat. 1457 (1996), to
permit the Commissioner to abate the assessment of interest
attributable to IRS errors or delays in performing both
managerial and ministerial acts. The amendment applies to
interest accruing with respect to deficiencies for taxable years
beginning after July 30, 1996, and therefore does not apply to
the matter before us.
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contacted the taxpayer in writing with respect to such deficiency
or payment. Id.
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. Sec. 301.6404-2T(b)(1), Temporary
Proced. & Admin. Regs., 52 Fed. Reg. 30163 (Aug. 13, 1987).3 A
decision concerning the proper application of Federal tax law (or
other Federal or State law) is not a ministerial act. Id.
Even where errors or delays are present, the Commissioner’s
decision to abate interest remains discretionary. See sec.
6404(e)(1); Mekulsia v. Commissioner, T.C. Memo. 2003-138, affd.
389 F.3d 601 (6th Cir. 2004). When Congress enacted section
6404(e), it did not intend the provision to be used routinely to
avoid payment of interest. Rather, Congress intended abatement
of interest to be used only where failure to do so “would be
widely perceived as grossly unfair.” H. Rept. 99-426, at 844
3
Final regulations under sec. 6404 were issued on Dec. 18,
1998, and contain the same definition of a ministerial act as do
the temporary regulations. See sec. 301.6404-2(b)(2), Proced. &
Admin. Regs. The final regulations generally apply to interest
accruing on deficiencies or payments of tax described in sec.
6212(a) for taxable years beginning after July 30, 1996, and do
not apply to the years at issue in this case. See sec. 301.6404-
2(d)(1), Proced. & Admin. Regs.
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(1985), 1986-3 C.B. (Vol. 2) 1, 844; S. Rept. 99-313, at 208
(1986), 1986-3 C.B. (Vol. 3) 1, 208.
II. Standard of Review and Burden of Proof
When reviewing the Commissioner’s determination not to abate
interest, we apply an abuse of discretion standard. See sec.
6404; Camerato v. Commissioner, T.C. Memo. 2002-28. The taxpayer
bears the burden of proof with respect to establishing an abuse
of discretion. See Rule 142(a). In order to prevail, the
taxpayer must establish that in not abating interest the
Commissioner exercised his discretion arbitrarily, capriciously,
or without sound basis in fact or law. Lee v. Commissioner, 113
T.C. 145, 149 (1999); Woodral v. Commissioner, 112 T.C. 19, 23
(1999).
III. Analysis
Petitioner contends that respondent’s treatment of him
during the audit and Appeals process was unfair and harsh and has
resulted in the accrual of interest that should be abated.
Petitioner’s general allegations of unfair treatment by the IRS
do not establish a ministerial error by respondent such that
interest accrued on petitioner’s deficiencies should be abated.
During the trial petitioner’s testimony strayed repeatedly from
ministerial error to the underlying tax liability, which
petitioner himself accepted by signing the settlement documents.
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Petitioner alleged that respondent failed to inform him that
he was not required to sign the Forms 872. Ms. Young testified
that she explained to petitioner and his representatives the
option of either signing the Forms 872 or having a notice of
deficiency issued. Regardless, all Forms 872 were sent to
petitioner before the effective date of section 6501(c)(4)(B),
which provides: “The Secretary shall notify the taxpayer of the
taxpayer’s right to refuse to extend the period of limitations,
or to limit such extension to particular issues or to a
particular period of time, on each occasion when the taxpayer is
requested to provide such consent.” Congress enacted section
6501(c)(4)(B) in 1998, and it is effective for requests for
consent to extend the period to assess tax made after December
31, 1999. Internal Revenue Service Restructuring and Reform Act
of 1998, Pub. L. 105-206, sec. 3461(b)(2), (c), 112 Stat. 764.
Thus, section 6501(c)(4)(B) is inapplicable to the Forms 872
petitioner signed because respondent’s requests that petitioner
sign them were all made prior to December 31, 1999.
Petitioner has not established an error or delay by
respondent in performing a ministerial act within the meaning of
section 6404(e) that would require abatement of interest.
We conclude that respondent’s determination not to abate
interest was not arbitrary, capricious, or without sound basis in
fact or law. In reaching all of our holdings herein, we have
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considered all arguments made by the parties, and to the extent
not mentioned above, we find them to be irrelevant or without
merit.
To reflect the foregoing,
Decision will be entered
for respondent.