T.C. Memo. 2010-133
UNITED STATES TAX COURT
KATHLEEN MILLER GEIGER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 21932-08. Filed June 16, 2010.
Kathleen Miller Geiger, pro se.
Rollin G. Thorley and Paul C. Feinberg, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION1
GERBER, Judge: This case stems from respondent’s denial of
petitioner’s request for an abatement of interest under section
1
Petitioner filed a petition requesting small tax case
proceedings under sec. 7463(a), I.R.C. Respondent moved for
removal of that designation on the ground that this interest
abatement proceeding fits within none of the categories of cases
that may be conducted under the small tax case provisions. The
Court granted respondent’s motion.
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6404(e).2 The issue presented for our consideration is whether
there was abuse of discretion in the denial of petitioner’s
abatement request.
FINDINGS OF FACT3
Petitioner resided in Nevada at the time her petition was
filed. She filed her 1997 Federal income tax return on June 25,
1998, showing tax due of $574. Respondent assessed the tax along
with $18.53 of interest on September 7, 1998. Petitioner, as
part of a divorce proceeding, was entitled to money from her
husband’s retirement account during 1996 and 1997. Petitioner
reported the withdrawal as alimony for 1996, but ultimately
respondent refunded the tax attributable to that item. In a
conversation about her 1996 return, one of respondent’s agents
suggested that petitioner file a Form 8606, Nondeductible IRAs
(Contributions, Distributions, and Basis), to reflect
petitioner’s basis in the retirement account to determine the
amount of income reportable, if any, for 1997. Petitioner filed
an amended return for 1997, including a Form 8606 showing her
basis in the retirement account. After following the suggestion
2
Unless otherwise indicated, all section references are to
the Internal Revenue Code applicable to the period under
consideration.
3
The parties’ stipulation of facts and the exhibits are
incorporated by this reference.
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of respondent’s agent, petitioner did not hear from respondent
until respondent began an examination of her 1997 return.
Petitioner’s 1997 tax return as amended was audited, and
respondent, in a June 21, 2000, notice of deficiency, determined
a $14,743 income tax deficiency and a $1,685 accuracy-related
penalty under section 6662(a). On September 15, 2000, petitioner
filed a petition with this Court (at docket No. 9739-00S) seeking
review of respondent’s determination (deficiency case).
Petitioner was represented in the deficiency case, and an
agreed decision reflecting a $6,855 income tax deficiency and an
$860 section 6662 accuracy-related penalty was entered on June
29, 2001. Shortly thereafter, on September 3, 2001, respondent
sent petitioner notification of a $900.424 outstanding balance
due on the $574 tax liability she had originally reported for
1997. Seven days later, on September 10, 2001, respondent
assessed the agreed income tax deficiency and accuracy-related
penalty from the deficiency case, along with $2,607.47 of accrued
interest and a $143.50 failure to pay penalty. Since the time of
the assessment of the additional 1997 tax, respondent has applied
over $6,000 of subsequent years’ tax refunds to satisfy portions
of petitioner’s outstanding 1997 liability.
4
The $900.42 included additional interest accruals and
penalties for late payment.
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On or about May 22, 2002, petitioner filed a Form 843, Claim
for Refund and Request for Abatement, seeking a $2,750 abatement
of interest and claiming that the accumulation of interest was
caused by respondent’s errors and delays. Petitioner’s request
for an abatement contained the following assertions: (1) That
petitioner was entitled to interest “netting”; (2) that
respondent erred in not notifying her until June 1999 that there
was a deficiency; (3) that respondent erred with respect to the
September 3 and 10, 2001, letters reflecting different amounts of
tax and/or interest due; and (4) that the tax assessment is
incorrect because petitioner was “misguided” (relied on incorrect
information from respondent) with respect to her filing of a Form
8606 along with her amended 1997 return.
Petitioner, on July 21, 2003, before respondent issued a
final determination, filed a petition with this Court seeking
review of respondent’s failure to abate interest, but that case
was dismissed for lack of jurisdiction. From the 2002 filing of
the claim for an abatement until almost 6 years later, petitioner
made numerous inquiries about the status of her claim and
respondent’s agents sent responses seeking additional time to
make their determination. During that same period, respondent
offset income tax refunds against the 1997 tax liability and
interest. During the pendency of her claim for abatement,
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petitioner had no legal course of action to require respondent to
make a determination.5
On March 7, 2008, respondent issued a final determination
disallowing, in full, petitioner’s request for an interest
abatement regarding her 1997 tax year. In the final
determination, respondent provided the following reasons for
denying petitioner’s request for an interest abatement: (1)
Interest netting does not apply in a situation where a taxpayer
does not have a credit available from another tax period; (2) the
1997 income tax deficiency was the result of an agreement between
respondent and petitioner (who was represented), so that
petitioner was not misled by respondent; (3) the September 3 and
10, 2001, letters, from respondent were not in disagreement
because the first letter was issued before the assessment of the
deficiency referenced in the latter one; (4) interest cannot be
abated on the basis of the tax law information provided by
respondent; and (5) petitioner did not make any payments on the
outstanding 1997 tax liability, except for respondent’s offsets
of overpayments from other years. Petitioner filed a petition
with this Court on September 5, 2008, seeking review of
respondent’s denial of her request for an abatement.
5
The law was changed for taxable years ending after July 22,
1998, by the enactment of new sec. 6404(g).
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On brief, respondent admitted that petitioner is entitled to
an abatement of 1997 tax year interest “from the date * * * [of
petitioner’s request] (May 22, 2002) through the date of * * *
[respondent’s] final determination denying her request (March 7,
2008).” In all other respects, respondent continues to stand by
his determination that petitioner is not entitled to an abatement
of 1997 tax year interest.
OPINION
Section 6404(e)(1) provides the Commissioner with authority
to abate the assessment of interest on a deficiency attributable
in whole or in part to any unreasonable error or delay by an
officer or employee of the Internal Revenue Service (acting in
his official capacity) in performing a ministerial or managerial
act. See also Woodral v. Commissioner, 112 T.C. 19, 24-25
(1999).
Section 301.6404-2(b)(1) and (2), Proced. & Admin. Regs.,
provides:
(b) Definitions-–(1) Managerial act.--means an
administrative act that occurs during the processing of
a taxpayer’s case involving the temporary or permanent
loss of records or the exercise of judgment or
discretion relating to management of personnel. A
decision concerning the proper application of federal
tax law (or other federal or state law) is not a
managerial act. Further, a general administrative
decision, such as the IRS’s decision on how to organize
the processing of tax returns or its delay in
implementing an improved computer system, is not a
managerial act for which interest can be abated under
paragraph (a) of this section.
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(2) Ministerial act.--means 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. A decision concerning
the proper application of federal tax law (or other
federal or state law) is not a ministerial act.
This Court may order abatement where the Commissioner abuses
his discretion by failing to abate interest. Sec. 6404(h)(1).
In order to prevail, a taxpayer must show6 that the Commissioner
exercised his discretion arbitrarily, capriciously, or without
sound basis in fact or law. Woodral v. Commissioner, supra at
23.
Respondent now concedes that petitioner is entitled to an
interest abatement for the 1997 tax year from the date of
petitioner’s abatement request (May 22, 2002) through the date of
respondent’s final determination denying her request (March 7,
2008). We must now consider whether it was an abuse of
discretion for respondent to deny abatement for any portion of
interest not so conceded. The periods we consider are from the
filing of the return to the request for abatement and from the
denial of the abatement to the time of trial.
Before the request for abatement, petitioner had filed her
1996 return reporting amounts from her divorced husband’s
6
No question has been raised by the parties regarding sec.
7491 and/or whether the burden shifted from petitioner to
respondent in this proceeding.
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retirement account as alimony. In dealing with respondent’s
agents for 1996, she was advised to amend her 1997 return and to
file a Form 8606 in order to show any basis in the retirement
account and thereby reduce the tax. Petitioner followed that
advice, thereby reporting a reduced 1997 income tax liability.
In June 1999 respondent examined petitioner’s 1997 return, as
amended, and determined a $14,743 income tax deficiency and a
$1,685 accuracy-related penalty. Petitioner filed a timely
petition with this Court, and during June 2001 her representative
resolved the deficiency dispute by agreeing to a reduced income
tax deficiency and accuracy-related penalty of $6,855 and $860,
respectively.
Shortly thereafter, the reduced deficiency and penalty were
assessed along with $2,607.47 of accrued interest and a $143.50
failure to pay penalty. Several months later (around May 22,
2002) petitioner filed her claim for a $2,750 abatement. In
support of the claim, petitioner contended that respondent had
given her bad tax advice and sent her contradictory statements of
her account and that she was entitled to interest netting.
Petitioner also complained about the amount of the agreed 1997
deficiency, explaining that she had not been made fully aware of
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what had transpired.7 Respondent concedes that petitioner is
entitled to an abatement of interest for the period during which
her request for an abatement was pending at the administrative
level.
The period from the filing of petitioner’s 1997 return
through the amended return filing, respondent’s examination, the
issuance of a notice of deficiency, petitioner’s petition to this
Court, and the settlement of that case is well within the normal
range of such activities and does not reflect the existence of an
unreasonable delay or error of any kind.8
Petitioner also claimed that an incorrect Form 1099-R,
Distributions From Pensions, Annuities, Retirement or Profit-
Sharing Plans, IRAs, Insurance Contracts, etc., had been issued
and that she was given bad advice about the filing of a Form 8606
and the amendment of her 1997 return. Neither of those
circumstances, however, would give rise to an abatement of
interest under section 6404. In particular, advice or a decision
involving the proper application of tax law or procedure is
7
We note that in the context of this proceeding concerning
our review of respondent’s denial of a request for abatement, we
are without jurisdiction to redetermine the amount of the
deficiency and there has been no showing of a fraud upon the
Court or a motion filed to reopen the deficiency case. See,
e.g., Naftel v. Commissioner, 85 T.C. 527, 530 (1985).
8
It is noted that no abatement is available for the period
preceding the time when the Commissioner first contacts a
taxpayer in writing.
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generally not considered to be a “ministerial or managerial act.”
Sec. 301.6404-2(b)(1) and (2), Proced. & Admin. Regs.; see also
Nelson v. Commissioner, T.C. Memo. 2004-34.
Although petitioner was sent successive overlapping notices,
they were not contradictory and each reflected the outstanding
tax liability at the time of issuance. Finally, petitioner has
not shown the appropriate conditions for interest netting; i.e.,
that there were existing credits that would have reduced the
amount of the finally agreed deficiency. Although respondent
offset overpayments from subsequent years against the agreed 1997
deficiency, that situation does not result in “interest netting”
for the 1997 tax year.
Finally, events that occurred from the March 7, 2008, denial
of petitioner’s claim for an abatement through the filing of a
petition and the issuance of this opinion do not warrant an
abatement of interest.
Accordingly, we hold that there was no abuse of discretion
by respondent in denying petitioner’s request for interest
abatement for periods other than that for which respondent has
conceded an abatement.
To reflect the foregoing,
Decision will be entered
for respondent.