MORRISON, Judge: This case was heard pursuant to the provisions of section 7463 of the Internal Revenue Code in effect when the petition was filed. ¹ Under section 7463(b), the decision to be entered is not reviewable by any other court, and this opinion shall not be treated as precedent for any other case. Pursuant to section 6330(d), petitioner Beverly Bang seeks review of the determination of the IRS Office of Appeals to sustain a proposed levy. Respondent, whom we refer to here as the IRS, has filed a motion for summary judgment.

The proposed levy seeks to collect interest and penalties that arose from Bang's failure to timely pay $2,636 of income tax for her 1983 tax year. The $2,636 payment, which was due on April 15, 1984, was made on May 12, 2006. The amount of the proposed levy is $32,343.46. The $32,343.46 comprises 2011 Tax Ct. Summary LEXIS 7">*8 four components:

• underpayment interest under section 6601(a); i.e. $21,553.52 in interest on the $2,636 underpayment from the day the payment was due, April 15, 1984, until the date the $2,636 was assessed by the IRS, March 27, 2006 (the $21,553.52 does not include the additional interest that continued to accrue until the date Bang paid the $2,636 on May 12, 2006); ²

• tax-motivated transaction interest under former section 6621(d)); i.e. the $21,553.52 computed above used an interest rate of 120 percent of the normal rate because the IRS had determined that the $2,636 underpayment was attributable to a tax-motivated transaction; ³

• the 50-percent-of-interest negligence penalty under former section 6653(a)(2); i.e. $10,776.76, which was 50 percent of $21,553.52, reflecting the determination that the $2,636 underpayment was due to negligence; ^{42011 Tax Ct. Summary LEXIS 7">*10} and

• a failure-to-pay-tax penalty; i.e. $13.18 assessed on June 12, 2006. ⁵

The levy did not include the $2,636 in additional income tax for the 1983 year and did not include a $131.80 section 6653(a)(1) 5-percent negligence penalty for underpaying her 1983 tax. ⁶Bang had already paid these amounts. At the Appeals Office, Bang was not entitled 2011 Tax Ct. Summary LEXIS 7">*9 to challenge her liability for, or the collection of, these two amounts of $2,636 and $131.80. These two amounts are therefore not before the Tax Court.

Background1. The Contra Costa Partnership

Bang was a partner in a partnership called Contra Costa Jojoba Research Partners. This partnership, which we shall refer 2011 Tax Ct. Summary LEXIS 7">*11 to as the Contra Costa partnership, filed a partnership tax return for its 1983 tax year on which it deducted $437,500 in research and experimental expenditures under section 174. On her own 1983 tax return, Bang reported a deduction of $12,500 for her share of the $437,500 deduction that the partnership had claimed. The 1983 tax return was due on April 15, 1984. See sec. 6072.

The IRS issued a Notice of Final Partnership Administrative Adjustment (FPAA) regarding the Contra Costa partnership on April 12, 1989. The FPAA determined that the $437,500 deduction for research and experimental expenditure was erroneous and that the appropriate deduction was zero. In explaining the reasons for the adjustment the FPAA stated:

We have disallowed the amount above because it has been determined that there is insufficient evidence to demonstrate that the expenses listed above qualify as research and development expenditures. Further, it has been determined that a portion of the research and experimental expenditures listed in the return may be for items not associated with research and experimental costs.

The FPAA did not specifically mention penalties, except for the following assertion:

THE FOLLOWING 2011 Tax Ct. Summary LEXIS 7">*12 PENALTIES ARE APPLICABLE TO THE PARTNER/SHAREHOLDER Section 6661 ⁷

On July 13, 1989, the Contra Costa partners challenged the FPAA determination in a partnership-level proceeding before the Tax Court, Contra Costa Jojoba Research Partners v. Commissioner, docket No. 17323-89. ⁸ On January 28, 1994, the parties to docket No. 17323-89 stipulated to be bound by the legal theories and findings of fact that would determine the eventual outcome of partnership adjustments in Utah Jojoba I Research v. Commissioner, Tax Court docket No. 7619-90. ⁹ The stipulation said:

With respect to all adjustments in respondent's Notice of Final Partnership Administrative Adjustment relating to Contra Costa Research Partners, a jojoba partnership, the parties stipulate to the following terms:

1. THE ABOVE ADJUSTMENTS ¹⁰ ARE THE ONLY ISSUES IN THE CASE.

A. UPON RESOLUTION OF THESE ISSUES, A PROPOSED DECISION WILL BE PREPARED 2011 Tax Ct. Summary LEXIS 7">*13 BY RESPONDENT'S COUNSEL.

2. The above adjustments, as specified in the preamble, shall be redetermined by application of the same legal theories as that which resolved the same partnership item adjustments with respect to the following partnership: Name of Case: Utah Jojoba I Research Tax Court Docket No.: 7619-90 (hereinafter the CONTROLLING CASE)

3. All issues involving the above adjustments shall be resolved as if the partnership in this case was the same as the partnership in the CONTROLLING CASE;

A. If the Court makes findings of underlying facts with respect to tax motivated transactions, a valuation overstatement, or other elements applicable to a determination of additions to tax and/or section 6621(c)¹¹ interest, which are attributable to the above-designated partnership item adjustments, the findings of fact in the CONTROLLING CASE shall apply to the partners in Contra Costa Jojoba Research Partners as if the partnership in this case was the same as the partnership in the CONTROLLING CASE; * * *.

* * * *

9. This stipulation applies to all partners in Contra Costa Jojoba Research Partners who were parties to the action within the meaning of I.R.C. § 6226(c) and (d) on the date 2011 Tax Ct. Summary LEXIS 7">*14 the stipulation is executed by the respondent and whose partnership items have not subsequently converted to nonpartnership items pursuant to I.R.C. § 6231(b) prior to the entry of the decision in this case; * * * .

In 1998, the Tax Court issued an opinion in Utah Jojoba I Research v. Commissioner, T.C. Memo. 1998-6. The Court held that the Utah Jojoba I Research partnership was "not entitled to a 2011 Tax Ct. Summary LEXIS 7">*15 section 174(a) research and experimental expense deduction for 1982 because it did not directly or indirectly engage in research or experimentation." Id. The Court in Utah Jojoba I did not make any finding or holding that expressly referred to penalties or interest. ¹²

On April 11, 2005, the Tax Court issued an order and decision in Contra Costa Jojoba Research Partners v. Commissioner, docket No. 17323-89 (Contra Costa). The order and decision sustained the partnership item adjustments that the IRS had determined in the Contra Costa FPAA. ¹³

2. The Notice of Deficiency: March 13, 2006

The 2011 Tax Ct. Summary LEXIS 7">*16 IRS issued a deficiency notice to Bang on March 13, 2006. Attached to the deficiency notice was a Form 4549-A, Income Tax Discrepancy Adjustments. We consider Form 4549-A to be part of the deficiency notice issued to Bang. Also attached to the deficiency notice was a Form 4089-B, Notice of Deficiency —Waiver. We refer to the Form 4089-B as the waiver form.

The first page of the deficiency notice itself (not the Form 4549-A or the Form 4089-B) contained the heading "Deficiency (Increase in tax)". Under that heading, the following text appeared:

IRC 6653(a)(1)(A)[should be 6653(a)(1)]: $131.80

IRC 6653(a)(1)(B)[should be 6653(a)(2)]: 50% of interest on $2,636.00.

The notice stated that

We have determined that you owe additional tax or other amount(s), or both, for the tax years(s) identified above. This letter is your NOTICE OF DEFICIENCY, as required by law. The enclosed statement shows how we figured the deficiency.

The notice continued:

If you want to contest this determination in court before making any payment, you have 90 days from the date of this letter * * * to file a petition with the United States Tax court for a redetermination of the deficiency * * * .

The notice added:

If you decide 2011 Tax Ct. Summary LEXIS 7">*17 not to file a petition with the Tax Court, please sign the enclosed waiver form and return it to us at the IRS address on the top of the first page of this letter. This will permit us to assess the deficiency quickly and can help limit the accumulation of interest.

If you decide not to sign and return the waiver, and you do not file a petition with the Tax Court within the time limit, the law requires us to assess and bill you for the deficiency after 90 days from the date of this letter * * * .

The section 6653(a)(1) and (2) penalties were discussed on a "Continuation Sheet" to the notice. The "Continuation Sheet" said:

It is determined that all or part of the underpayment of tax for the taxable year(s) is due to negligence or intentional disregard of rules and regulations. This penalty is five (5) percent of the full underpayment of tax (except that portion of the underpayment which is due to fraud) plus fifty (50) percent of the interest due on the part of the underpayment that is due to negligence. The penalty is figured on the earlier of the date of assessment or the date the tax was paid. If the return was not timely filed, the penalty is asserted on the full amount of the corrected 2011 Tax Ct. Summary LEXIS 7">*18 tax instead of the underpayment of tax.

We now turn to Form 4549-A. The Form 4549-A contained the following chart showing the calculation of the $2,636 and penalties:

1. Adjustments to Income
a. Ordinary Loss	12,500.00
2. Total Adjustments	12,500.00
3. Taxable Income Per Return or as Previously Adjusted	9,959.00
4. Corrected Taxable Income	22,459.00
Tax Method	TAX TABLE
Filing Status	Single
5. Tax	4,062.00
6. Additional Taxes/Alternative Minimum	[blank]
7. Corrected Tax Liability	4,062.00
8. Less Credits
a. Investment Credit	187.00
9. Balance (Line 7 less total of Lines 8a thru 8d)	3,875.00
10. Plus Other Taxes
a. Alternative Minimum Tax	0.00
11. Total Corrected Tax Liability (Line 9 plus Lines 10a thru 10d)	3,875.00
12. Total Tax Shown on Return or as Previously Adjusted	1,239.00
13. Adjustments to a, b, c
14. Deficiency- Increase in Tax or (Overassessment - Decrease in Tax) (Line 11 less Line 12 adjusted by Lines 13a thru 13d)	2,636.00
15. Adjustments to Prepayment Credits-Increase (Decrease)
16. Balance Due or (Overpayment) - (Line 14 adjusted by Line 15) (Excluding interest and penalties)	2,636.00
17. Penalties/Code Sections
a. Negligence - IRC 6653(a)	131.80
18. Total Penalties	131.80

Underreporter attributable to negligence: 2011 Tax Ct. Summary LEXIS 7">*19 (1981-1987) A tax addition of 50 percent of the interest due on the underpayment will accrue until it is paid or assessed. 0.00

Underreporter attributable to fraud: (1981-1987) A tax addition of 50 percent of interest due on the underpayment will accrue until it is paid or assessed. 0.00

Underreporter attributable to Tax Motivated Transactions (TMT). Interest will accrue and be assessed at 120% of underpayment rate in accordance with IRC 6621(c). ¹⁴ 2,636.00

After this, there appeared a section entitled "Summary of Taxes, Penalties, and Interest". This is the text of that section:

a. Balance due or (Overpayment) Taxes - (Line 16, Page 1)	2,636.00
b. Penalties (Line 18) - computed to 2/27/2006	131.80
c. Interest (IRC §6601) - computed to 3/29/2006	0.00
d. TMT interest - computed to 3/29/2006 (on TMT underpayment)	0.00
e. Amount due or refund - (sum of Lines a, b, c and d)	2,767.80

Beneath the Summary of Taxes, Penalties, and Interest was a box entitled "Other Information". This box contained the following discussion of the increased interest rate due to tax-motivated transactions:

The adjustment on this report is based on the changes made to Contra Costa Jojoba Research Partners EIN#94-2855838 per 2011 Tax Ct. Summary LEXIS 7">*20 the Tax Court Decision.

All or part of the underpayment of tax you were required to show on your return is a substantial understatement attributable to Tax Motivated Transactions, as defined by Section 6621(c)(3) ¹⁵ of the Internal Revenue Code. Accordingly, the annual interest rate payable on your income taxes on this understatement is 120 percent of the adjusted rate established under Code Section 6621(b).

The Tax Deficiency and the Tax Motivated Transaction (TMT) Interest have been processed against your account, based on the Partnership examination results, and will be reflected on the Statement of Account.

The Notice of Deficiency reflects only the penalty portion of this examination report * * *.

If you require any further information, please contact your Tax Matters Partner.

On the next page, a section entitled "Explanation of Items" discussed the negligence penalties under section 6653(a):

Since all or part of the underpayment of tax you were required to show on your return is due to negligence or intentional disregard of rules and regulations, you are being charged a penalty under Section 6653(a) of the Internal Revenue Code. This penalty is 5 percent of the full underpayment of 2011 Tax Ct. Summary LEXIS 7">*21 tax plus 50 percent of the interest due on the part of the underpayment that is due to negligence. We figured the penalty as of the date of assessment or the date the tax was paid, whichever came first.

3. IRS Assessed the Increase in Bang's Tax Resulting From the Disallowance of the Contra Costa Deduction and Underpayment Interest: March 27, 2006

On March 27, 2006, after the mailing of the deficiency notice, the IRS assessed the $2,636 (the tax on the increased income attributable to Bang's share of the research and experimental expenditures disallowed at the partnership level), and the accumulated interest of $21,553.52 pursuant to section 6601 (underpayment interest) and former section 6621(d) (20-percent increase in interest rate for tax-motivated transactions) on the $2,636. ^{162011 Tax Ct. Summary LEXIS 7">*22} The $21,553.52 represented the interest that accumulated from the date the tax was due, April 15, 1984, until the date of assessment, March 27, 2006. Interest continued to accrue after assessment until the date the tax was paid. See sec. 6601(a). The interest charge included the 20-percent additional interest for tax-motivated transactions, as explained above.

4. Bang Waived Restrictions on Assessment (May 8, 2006) and Made Payments (May 12, 2006)

Bang did not file a petition with this Court in response to the deficiency notice. Instead, on May 8, 2006, she executed the waiver form that had been attached to the deficiency notice. The waiver form listed the following under "Deficiency—Increase in Tax and Penalties":

Tax Year Ended:	December 31, 1983
Deficiency:	[blank]
Increase in tax	[blank]
Penalties
IRC 6653(a)(1)(A)	131.80
IRC 6653(a)(1)(B) 17	See *a below
*a 50% of interest on	2,636.00

Above Bang's signature, 2011 Tax Ct. Summary LEXIS 7">*23 the waiver form reads:

See the attached explanation for the above deficiencies.

I consent to the immediate assessment and collection of the deficiencies (increase in tax and penalties) shown above, plus any interest provided by law.

Bang sent a payment of $2,767.80 to the IRS (the sum of $2,636 and $131.80). The payment was received by the IRS on May 12, 2006, and applied to the account that the IRS used to keep track of her 1983 tax year. ¹⁸

5. Assessment of the Two Negligence Penalties and Failure-To-Pay Penalty: June 12, 2006

On June 12, 2006, after Bang's execution of the waiver form, the IRS assessed the 5-percent negligence penalty of $131.80 (5 percent of $2,636), the 50-percent-of-interest negligence penalty of $10,776.76 (50 percent of the $21,553.52 for tax-motivated transaction 2011 Tax Ct. Summary LEXIS 7">*24 and underpayment interest), and a failure-to-pay-tax penalty of $13.18 (the latter of which was not mentioned in the notice). ¹⁹

The $10,776.76 amount was 50 percent of the $21,553.52 interest charge on the $2,636 underpayment. Calculating the 50-percent-of-interest penalty in this way assumed that the entire $2,636 underpayment was attributable to negligence. See former sec. 6653(a)(2) (penalty is 50 percent of interest on portion of underpayment attributable to negligence).

The record does not indicate whether the failure-to-pay-tax penalty was the penalty imposed by section 6651(a)(2) (failure to timely pay tax shown on return), or the penalty imposed under 6651(a)(3) (failure to timely pay tax that should have been shown on return). We do not have any information about how the $13.18 was calculated, although we observe that $13.18 is 0.5 percent of $2,636.

6. Bang's Failure To File Tax Court Petition: June 12, 2006

June 2011 Tax Ct. Summary LEXIS 7">*25 12, 2006, was also the last day for Bang to file a petition with the Court. She did not file a petition.

7. Final Notice of Intent To Levy: August 23, 2006

The IRS then issued to Bang a Final Notice of Intent to Levy and Notice of Your Right to a Hearing on August 23, 2006, notifying Bang that the IRS intended to levy to collect $32,343.46. Although the final notice of intent to levy does not identify the components of the $32,343.46, we can tell from other parts of the record that the $32,343.46 is composed of the following amounts:

Underpayment interest and tax-motivated transaction interest	$21,553.52
50-percent-of-interest negligence penalty	10,776.76
Failure-to-pay-tax penalty	13.18
Total	32,343.46

The $32,343.46 assessed therefore does not include the $2,636 and the 5-percent negligence penalty of $131.80, which Bang had already paid, as noted above.

8. Collection Due Process Hearing

Bang's accountant filed a Form 12153, Request for a Collection Due Process Hearing, on her behalf, together with a letter stating that

it seems very unreasonable that [Bang] should be assessed, [sic] negligence, penalties and interest on deficiencies dating back to 1983 and 1985. She promptly paid the tax deficiency 2011 Tax Ct. Summary LEXIS 7">*26 in 2006 when notices were brought to her attention. We are requesting all penalties and interest be removed.

He also argued that Bang made her investment "in good faith expecting a reasonable return."

The telephone conference occurred on January 25, 2007. According to the Appeals officer's notes of the conference, Bang's accountant

confirmed the TP's [taxpayer's] primary issue is the liability. He firmly believes the TP [taxpayer] should not have been assessed the negligence penalty.

In his declaration accompanying the IRS's motion for summary judgment, the Appeals officer states that during the telephone conference, the accountant "stated that the purpose behind the filing of a Request for a Collection Due Process Hearing was to challenge the merits underlying * * * Bang's 1983 income tax liability; [sic] including the negligence addition to tax." ²⁰ The notes and the declaration say that Bang's accountant offered no collection alternatives. The Appeals officer informed the accountant that he could not raise objections to the negligence penalty at a collection due process hearing because Bang had received the deficiency notice and signed the waiver form. The notes said:

I explained that 2011 Tax Ct. Summary LEXIS 7">*27 under IRS 6330(c)(2)(B) the taxpayer cannot raise liability in a Collection Due Process (CDP) Hearing if they have had a prior opportunity. In this case the taxpayer both received a SND and signed a F.4089-B agreement.

The notes stated that Bang's accountant said that he was not aware of such a rule, nor was he aware that his client had signed a waiver form.

On March 27, 2007, the IRS Appeals Office issued a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 that sustained the proposed levy. The determination recognized that Bang's request for a hearing contested her liability for "assessed negligence, penalties, and interest." But the determination stated:

Taxpayer was not able to dispute liability within the hearing.

And:

Taxpayer did raise liability as an issue. Taxpayer was not allowed to raise liability because she had a prior opportunity to dispute the liability.

* * * *

The taxpayer's representative, Randall Kramer, stated the primary issue is the liability. He firmly believes the taxpayer should 2011 Tax Ct. Summary LEXIS 7">*28 not have been assessed the negligence penalty. Settlement Officer Bruce Stork explained that under IRC 6330(c)(2)(B) the taxpayer cannot raise liability in a Collection Due Process (CDP) Hearing if they have had a prior opportunity. In this case the taxpayer both received a Statutory Notice of Deficiency and signed a F.4089-B agreement. The Audit Reconsideration Process was explained and recommended as the appropriate venue to get the taxpayer's issue resolved.

Taxpayer presented no other issues.

Bang timely challenged the levy by petition to this Court on April 27, 2007. In a letter attached to her petition, she stated that she felt it was "unreasonable" that she be "assessed a penalty and 20 years [sic] worth of accrued interest" for an investment she made with "her trusted investment advisor of many years" with no tax avoidance purpose.

The extensive procedural history of the Contra Costa partners' case and this case is summarized in the chart below.

Procedural History of Cases Against Contra Costa Partners and Bang
Date	Action	Effect
Apr. 12, 1989	IRS issues FPAA for Contra Costa partnership	•IRS reduces $437,500 in deductions claimed by partnership to $0
July 13, 1989	Contra Costa partners and IRS agree to be bound by Utah Jojoba I Research v. Commissioner, docket No. 7619-90	•Agreement requires that the resolution of the partnership items in Contra Costa partnership case would follow the determinations made by the Tax Court in the partnership case Utah Jojoba I Research v. Commissioner, docket No. 7619-90
Jan. 5, 1998	Tax Court issues opinion in Utah Jojoba I Research v. Commissioner, T.C. Memo. 1998-6	•Tax Court disallows the deductions claimed by Utah Jojoba I partnership
Apr. 11, 2005	Tax Court decides Contra Costa case	•Tax Court upholds all adjustments in the FPAA issued to Contra Costa partnership
March 16, 2006	IRS issues deficiency notice to Bang	•Calculations assume that Bang owes $2,636 more tax than she reported in connection with the disallowed partnership loss.
		•Bang owes $131.80, or 5-percent of $2,636, for the 5-percent negligence penalty.
		•Bang owes 50 percent of interest on $2,636 as the 50-percent negligence penalty, calculated using the interest accumulated from the date the tax was due to the earlier of the date the tax is assessed or the date the tax is paid.
March 27, 2006	Assessment against Bang	Assessment includes:
		•$2,636 increase in Bang's tax liability because of disallowance of her share of the disallowed Contra Costa deductions
		•$21,553.52 in underpayment interest on $2,636 (calculated at the 120-percent rate because of the tax-motivated transaction)
May 8, 2006	Bang consents to immediate assessment	Consent to assessment includes:
		•$131.80 (5-percent negligence penalty)
		•50 percent of interest on $2,636
May 12, 2006	Bang's payment to the IRS is received	Payment includes:
		•$2,636
		•$131.80 (5-percent negligence penalty)
June 12, 2006	IRS assesses penalties	Assessment includes:
		•$131.80 (5-percent negligence penalty)
		•$10,776.76 (50-percent negligence penalty)
		•$13.18 failure-to-pay-tax penalty
June 12, 2006	Last day for Bang to challenge deficiency notice by filing a Tax Court petition	Amounts Bang could challenge by filing a petition:
		•$131.80 (5-percent negligence penalty)
		•$10,776.76 (50-percent negligence penalty)
August 23, 2006	IRS issues final notice of intent to levy	Final notice of intent to levy includes:
		•$10,776.76 (50-percent negligence penalty)
		•$21,553.52 in underpayment interest on $2,636 (calculated at the 120-percent rate because of the tax-motivated transaction)
March 27, 2007	IRS issues notice of determination	•Sustains levy

Discussion1. 2011 Tax Ct. Summary LEXIS 7">*29 Arguments of the Parties

The IRS asserts in its motion for summary judgment that Bang's receipt of the deficiency notice precludes her from challenging the 50-percent-of-interest negligence penalty. The IRS also argues that Bang's complaint over the unreasonableness of the accrual of interest was not made with sufficient specificity at the hearing to be considered a claim for interest abatement under section 6404(e). According to the IRS, Bang failed to specify grounds on which an interest abatement claim could be granted, such as a specific error or delay caused by a ministerial act of the IRS. The IRS also argues that even if the Court could consider whether Bang is entitled to abatement of interest under section 6404(e), the Court should sustain the Appeals officer's decision not to abate interest.

With respect to the amount of its assessment of tax-motivated transaction interest, the IRS claims that the stipulation to be bound and the findings of fact in Utah Jojoba I are sufficient "to establish that petitioner's involvement in Contra Costa Jojoba Research Partners was a 'tax motivated transaction'", [and] that "petitioner's underpayment was attributable to the tax motivated transactions 2011 Tax Ct. Summary LEXIS 7">*30 of the Contra Costa Jojoba Research Partners partnership" and that the underpayment is substantial.

The IRS did not make any arguments in its submission to this Court regarding the failure-to-pay-tax-penalty assessed.

Bang's response to the IRS's motion for summary judgment was as follows:

Petitioner objects to and resists Respondent's Motion for Summary Judgment on the following grounds:

1. The calculation and assessment of Restricted Interest and the Negligence Penalty are both incorrectly determined and exceed the maximum amount allowable by law.

2. The signature of Petitioner on the Notice of Deficiency/Waiver dated May 8, 2006 was improperly obtained because the listing of income tax discrepancy adjustments did not include the Restricted Interest or the Negligence Penalty amounts causing the taxpayer to believe that the amount she was agreeing to was only $2,767.80, rather than the additional amount of $32,000.00 plus dollars. Therefore it should be thrown out and the taxpayer allowed to contest the entire balance assessed.

THEREFORE, Petitioner respectfully requests that Respondent's Motion for Summary Judgment be denied and for such other and further relief as the Court deems just.

We 2011 Tax Ct. Summary LEXIS 7">*31 interpret Bang's response as a challenge to her liability for the underpayment interest, the increased rate of interest for a tax-motivated transaction, the 50-percent-of-interest negligence penalty, and the failure-to-pay-tax penalty, but not her liability for the $2,636 and the 5-percent negligence penalty.

2. Standard of Review and Issues To Be Decided

A motion for summary judgment will be granted if the pleadings, answers to interrogatories, depositions, admissions, and other acceptable materials, together with any affidavits, show 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(b); Elec. Arts, Inc. v. Commissioner, 118 T.C. 226">118 T.C. 226, 118 T.C. 226">238 (2002). A partial summary adjudication may be made which does not dispose of all the issues in the case. Rule 121(b); Tracinda Corp. v. Commissioner, 111 T.C. 315">111 T.C. 315, 111 T.C. 315">323-324 (1998). The moving party, here the IRS, has the burden of proving that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. Rauenhorst v. Commissioner, 119 T.C. 157">119 T.C. 157, 119 T.C. 157">162 (2002).

At a collection due process hearing, a taxpayer may raise challenges to the existence or amount 2011 Tax Ct. Summary LEXIS 7">*32 of the "underlying tax liability" only if the taxpayer "did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability." Sec. 6330(c)(2)(B). ²¹ If a taxpayer is not permitted under section 6330 to raise a challenge to the underlying tax liability, the only issues that a taxpayer can raise before the Appeals officer are appropriate spousal defenses, challenges to the appropriateness of collection actions, and any collection alternatives. Sec. 6330(c)(2)(A).

Section 6330(d)(1) provides a person with the right to obtain Tax Court review of the administrative determination by filing a petition with the Court within 30 days of the determination. If the validity of the underlying tax liability is 2011 Tax Ct. Summary LEXIS 7">*33 properly at issue, the Court will review the determination de novo. Giamelli v. Commissioner, 129 T.C. 107">129 T.C. 107, 129 T.C. 107">111 (2007); Davis v. Commissioner, 115 T.C. 35">115 T.C. 35, 115 T.C. 35">39 (2000); Sego v. Commissioner, 114 T.C. 604">114 T.C. 604, 114 T.C. 604">610 (2000); Goza v. Commissioner, 114 T.C. 176">114 T.C. 176, 114 T.C. 176">181-182 (2000). All other elements of the determination are reviewed for abuse of discretion. 114 T.C. 604">Sego v. Commissioner, supra at 610; 114 T.C. 176">Goza v. Commissioner, supra at 181-182. Whether an abuse of discretion has occurred depends upon whether the exercise of discretion is without sound basis in fact or law. Freije v. Commissioner, 125 T.C. 14">125 T.C. 14, 125 T.C. 14">23 (2005). Generally we consider only those arguments, issues, and other matters (including a challenge to the underlying tax liability) that the taxpayer raised at the collection hearing or otherwise brought to the attention of Appeals. 129 T.C. 107">Giamelli v. Commissioner, supra at 112-113; Magana v. Commissioner, 118 T.C. 488">118 T.C. 488, 118 T.C. 488">493 (2002); see also sec. 301.6330-1(f)(2), Q&A-F3, Proced. & Admin. Regs.

Bang did not offer a specific collection alternative to be considered by the Appeals officer, nor did she raise any other appropriate defenses to collection. See sec. 6330(c)(2)(A), (3)(B). Her sole contention is that 2011 Tax Ct. Summary LEXIS 7">*34 she is not liable for various interest and penalties, specifically underpayment interest, the 20-percent increase in interest rate for underpayments attributable to tax-motivated transactions, the 50-percent-of-interest penalty for underpayments resulting from negligence, and the failure-to-pay penalty.

3. Underpayment Interest

Section 6601(a) provides that if a taxpayer fails to pay the tax imposed by the Code, interest shall accrue from the date that the tax payment is due until the date it is paid. The rate of interest is "the underpayment rate established under section 6621". ^{222011 Tax Ct. Summary LEXIS 7">*35} Id. To illustrate the calculation of underpayment interest, suppose that a taxpayer fails to pay $1,000 in tax that was due on April 15. Assume that the underpayment rate is 6 percent for the second quarter of the same hypothetical year. On May 15, the taxpayer would owe interest of $1,000 x (1+(0.06/365))30-$1,000. This amount reflects 30 days of interest, compounded daily. Sec. 6622(a). ²³This amount is separate from the $1,000 tax liability.

On her 1983 income tax return, Bang claimed a $12,500 deduction. The Tax Court in the partnership-level Contra Costa partnership proceeding determined that Bang was not entitled to the deduction. Without the deduction, Bang's tax liability for 1983 was $2,636 more than she reported and paid on her 1983 return. Thus, under section 6601(a), Bang owed underpayment interest on the $2,636 from April 15, 1984, until May 12, 2006, the day she paid the $2,636.

On March 27, 2006, the IRS assessed the $2,636 increase in tax resulting from the disallowance of Bang's share of the partnership's deduction. That same day, it assessed $21,553.52 in interest on the $2,636 underpayment, calculated 2011 Tax Ct. Summary LEXIS 7">*36 to the day of assessment. The interest was calculated at 120 percent of the normal rate because the IRS had determined that the entire underpayment was attributable to a tax-motivated transaction.

The IRS notified Bang that it intended to levy to collect the underpayment interest (among other amounts). Bang challenged the levy at the administrative level. Bang contested her interest liability in her request for a hearing. Her contention was that the interest was compounded over an excessive amount of time. The Appeals officer did not consider Bang's contention.

A. Except for Entitlement to Interest Abatement Under Section 6404(e)(1), We Will Not Consider Any Issues Related to Bang's Liability for Underpayment Interest.

The IRS argues in its motion for summary judgment that Bang should be considered to have raised her liability for interest at the hearing only as a request for interest abatement under section 6404(e)(1) (a provision that permits the IRS to abate interest accruals caused by IRS errors and delays), not as a challenge to any other aspect of her interest liability. Thus, the IRS urges us not to reach any other aspect of Bang's liability for underpayment interest. We agree 2011 Tax Ct. Summary LEXIS 7">*37 with the IRS that our review should be limited. We note that in her response to the IRS's motion for summary judgment, Bang failed to point to any other error in the IRS's determination that she was liable for underpayment interest.

B. Whether Bang Preserved Her Interest Abatement Claim for Judicial Review

The IRS also contends that Bang failed to make a claim for interest abatement with sufficient specificity at the administrative level and that consequently the Court in reviewing the determination of the Appeals officer cannot consider her claim for interest abatement. The IRS cites 129 T.C. 107">Giamelli v. Commissioner, supra at 113, in support of this proposition. We disagree.

Bang's accountant argued in his letter attached to the request for a hearing that the underpayment interest should be abated because it had accrued over an unreasonably long time and because she paid the underlying amount of $2,636 when it was finally brought to her attention. These statements sufficiently preserved Bang's argument regarding interest abatement for judicial review. In Brecht v. Commissioner, T.C. Memo. 2008-213, a taxpayer made no argument to the Appeals officer explaining why interest should be abated, and 2011 Tax Ct. Summary LEXIS 7">*38 the Court held that it could not review the taxpayer's entitlement to interest abatement. By contrast with Brecht, Bang presented her arguments about interest abatement in her request for a hearing. The Appeals officer's failure to determine whether Bang was entitled to interest abatement does not preclude us from making the determination ourselves. See Urbano v. Commissioner, 122 T.C. 384">122 T.C. 384, 122 T.C. 384">391 (2004) (citing Katz v. Commissioner, 115 T.C. 329">115 T.C. 329, 115 T.C. 329">340-341 (2000)) (holding that we can review an Appeals officer's denial of interest abatement if the issue was raised at the collection due process hearing). The alternative of remanding the case for the Appeals officer to determine interest abatement is not appropriate because Bang has been given sufficient opportunity both at her hearing and in this proceeding to explain why she is entitled to interest abatement. See Lunsford v. Commissioner, 117 T.C. 183">117 T.C. 183, 117 T.C. 183">189 (2001) (declining to remand collection review case to Appeals officer when the Court can evaluate the merits of the taxpayer's arguments without a remand).

C. Bang Is Not Entitled to Interest Abatement

Bang's main argument, presented by her accountant at the hearing, is that the interest 2011 Tax Ct. Summary LEXIS 7">*39 assessed has accrued over an unreasonably long time because of pending litigation about which she had no knowledge. However, the length of time which partnership-level litigation takes to resolve is not a delay in a "ministerial act" on which an abatement claim may be based. Lee v. Commissioner, 113 T.C. 145">113 T.C. 145, 113 T.C. 145">150 (1999) ("The mere passage of time in the litigation phase of a tax dispute does not establish error or delay by the Commissioner in performing a ministerial act."); Corson v. Commissioner, T.C. Memo. 2009-95; Kimball v. Commissioner, T.C. Memo. 2008-78. Bang is therefore not entitled to interest abatement. The IRS did not err in failing to abate interest. ²⁴

4. 20 Percent Additional Interest for Tax-Motivated Transactions

Under former section 6621(d) (renumbered as section 6621(c) pursuant to the Tax Reform Act of 1986, see supra note 11), the 2011 Tax Ct. Summary LEXIS 7">*40 annual rate of interest on the portion of an underpayment that is attributable to a tax-motivated transaction is 120 percent of the "underpayment rate" established under section 6621(b). Deficit Reduction Act of 1984, Pub. L. 98-369, 98 Stat. 682. ^{252011 Tax Ct. Summary LEXIS 7">*41} The increase in the interest rate required by former section 6621(d) affects the interest rate only for the period from December 31, 1984—the effective date of section 6621(d)—until the date the tax is finally paid. For periods before December 31, 1984, the interest rate is unaffected by former section 6621(d).

To illustrate the calculation of the interest rate for tax-motivated transactions, suppose that a taxpayer fails to pay $1,000 in tax on April 15, when the tax return and the tax are due. Assume further that the failure to timely pay the entire $1,000 is due to a tax-motivated transaction. Assume that the underpayment rate is 6 percent 2011 Tax Ct. Summary LEXIS 7">*42 for the second quarter of the year in which the return is due. Section 6621(d) would require that the 6-percent interest rate be increased by 20 percent to 7.2 percent. On May 15, the taxpayer would owe interest of $1,000 x (1+(0.072/365))30-$1,000, an amount that reflects 30 days of interest accumulation compounded daily. Sec. 6622(a). This amount is separate from the $1,000 tax liability.

Bang did not have an opportunity before the collection hearing to contest all of the elements of the tax-motivated interest penalty. The deficiency notice was not such an opportunity. Even though the deficiency notice contained the assertion that Bang was liable for increased interest on the portion of her underpayment attributable to a tax-motivated transaction and even though Bang could have filed a Tax Court petition in response to the deficiency notice, the Court would not have had jurisdiction in a partner-level deficiency case to determine Bang's liability for the increased interest. The reason is that increased interest is not a deficiency. Odend'hal v. Commissioner, 95 T.C. 617">95 T.C. 617, 95 T.C. 617">621 (1990); White v. Commissioner, 95 T.C. 209">95 T.C. 209, 95 T.C. 209">214 (1990). Thus, the Appeals officer who made the determination 2011 Tax Ct. Summary LEXIS 7">*43 sustaining the levy against Bang had jurisdiction to determine whether Bang should be subject to the increased interest rate for a tax-motivated transaction. Although Bang's Appeals officer did not consider Bang's argument why she should not be subject to the increased interest rate for tax-motivated transactions, this does not preclude us from considering whether Bang is liable ourselves.

Bang is liable for the increased interest for tax-motivated transactions. First, the transactions of the partnership were tax motivated. A tax-motivated transaction includes a transaction for which there is "an accounting method specified in regulations prescribed by the Secretary as a use which may result in a substantial distortion of income for any period." Former sec. 6621(d)(3)(A)(iv). Substantial distortions of income include a deduction which results in a "material distortion of income". Sec. 301.6621-2T, Q&A-3(9)(iii), Temporary Proced. & Admin. Regs., 49 Fed. Reg. 50392 (Dec. 2, 1984). The Contra Costa partners agreed to be bound by the determinations of issues made in Utah Jojoba I Research v. Commissioner, docket No. 7619-90, including "findings of underlying facts with respect to tax motivated 2011 Tax Ct. Summary LEXIS 7">*44 transactions, a valuation overstatement, or other elements applicable to a determination of additions to tax and/or section 6621(c) interest." The Tax Court held in Utah Jojoba I Research v. Commissioner, T.C. Memo. 1998-6, that the "R&D agreement before us was mere window dressing, designed and entered into solely to decrease the cost of participation in the jojoba farming venture for the limited partners through the mechanism of a large up-front deduction for expenditures that in actuality were capital contributions." To claim a large upfront deduction for nondeductible capital expenditures is a material distortion of income. The underpayment resulting from such a deduction is attributable to a tax-motivated transaction. Bailey v. Commissioner, 90 T.C. 558">90 T.C. 558, 90 T.C. 558">629 (1988), affd. in part and vacated in part 912 F.2d 44">912 F.2d 44 (2d Cir. 1990); Glassley v. Commissioner, T.C. Memo. 1996-206. Because the Contra Costa partners, including Bang, were bound by the disposition of issues and findings of fact in Utah Jojoba I, the Contra Costa partnership's transactions were tax motivated.

Second, we must determine the amount of Bang's underpayment of tax that was attributable to the partnership's tax-motivated 2011 Tax Ct. Summary LEXIS 7">*45 transaction and whether that underpayment was substantial. See former sec. 6621(d), Deficit Reduction Act of 1984, Pub. L. 98-369, sec. 144(a), 98 Stat. 682. The record indicates that the entire $12,500 adjustment of Bang's research and experimental expenditures deduction is attributable to the partnership's tax-motivated transaction. The underpayment stemming from this adjustment ($2,636) is substantial because it exceeds $1,000. See id. As all elements of former section 6621(d) interest have been established, we sustain the Appeals officer's determination with respect to tax-motivated transaction interest.

5. Fifty-Percent-of-Interest Negligence Penalty

The IRS argues that Bang was not entitled to dispute her liability for the 50-percent-of-interest penalty with the Appeals officer. It contends that Bang had already received a deficiency notice for the liability. We agree.

Under former section 6653(a)(2), if a portion of an underpayment is attributable to negligence (or intentional disregard of the rules or regulations), there is added to the tax 50 percent of the interest payable under section 6601 on the portion of the underpayment attributable to such negligence. ^{262011 Tax Ct. Summary LEXIS 7">*47} For this purpose, 2011 Tax Ct. Summary LEXIS 7">*46 the interest payable under section 6601 includes the 120-percent increased interest rate for tax-motivated transaction interest if the portion of the underpayment that is attributable to negligence is also attributable to a tax-motivated transaction. The interest period for which the 50-percent-of-interest negligence penalty applies begins on the day the payment of tax was due and stops accruing once the taxpayer pays the tax or the IRS assesses the tax. Id.

To illustrate how this penalty is calculated, assume that a taxpayer fails to pay $1,000 of tax due on April 15. Suppose further that of this $1,000 underpayment, $200 is both (1) the result of the taxpayer's negligence, and (2) attributable to a tax-motivated transaction. Suppose that over the next 3 years the underpayment interest rate is a constant 6 percent and that the tax is assessed 3 years later on April 15. Interest will be computed at an interest rate of 6 percent, increased by 20 percent for tax-motivated transactions, resulting in a total interest charge of 7.2 percent that is compounded daily under section 6662. The 3-year interest charge would be $48.22 (that is, $200 x (1+(0.072/365))(365 x 3))-$200. The taxpayer would then owe a negligence penalty of $24.11 (that is, 50 percent of the entire interest charge of $48.22).

Bang claimed on her 1983 income tax return that she had a $12,500 loss stemming from a loss claimed 2011 Tax Ct. Summary LEXIS 7">*48 by the Contra Costa partnership. She and the other Contra Costa partners then agreed to be bound by the decision in the Utah Jojoba partnership case. The Court in the Contra Costa case disallowed the losses claimed by the Contra Costa partnership. The amount of the 50-percent-of-interest negligence penalty is a deficiency attributable to an affected item that requires a partner-level determination. ^{272011 Tax Ct. Summary LEXIS 7">*50 2011 Tax Ct. Summary LEXIS 7">*51 2011 Tax Ct. Summary LEXIS 7">*52} Thus, the IRS was required to issue Bang a deficiency notice to assert that Bang was liable for the 6653(a)(2) negligence penalty. See former sec. 6662(a)(2); Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97-248, sec. 323(a), 96 Stat. 613 (renumbering former section 6660 of the Internal Revenue Code of 1954, stating in part that references to "tax" in the Code include additions to tax and penalties, and additions to tax and penalties must be collected in the same manner as taxes, unless a statutory exception applies). (This is so even though the amount of underpayment interest, including the increased 120-percent rate for a tax-motivated transaction, is not subject to deficiency procedures.) The IRS issued such a deficiency notice. This Court has jurisdiction in deficiency 2011 Tax Ct. Summary LEXIS 7">*49 cases to redetermine the amounts of penalties pursuant to section 6214(a). ²⁸Thus, had Bang challenged the 50-percent-of-interest-negligence penalty by filing a petition in response to her deficiency notice, this Court would have had the power to decide if she should have been relieved of it. See Ghose v. Commissioner, T.C. Memo. 2008-80 (after the Tax Court entered the decision against the Contra Costa partners at the partnership level, the IRS issued a notice of deficiency to one of Bang's partners for the 1983 year, alleging a penalty of $272.30 under former section 6653(a)(1), and "50 percent of the interest" due on the deficiency for the 1983 taxable year under former section 6653(a)(2); the partner filed a petition, and after a trial, this Court held that the partner was liable for the additions to tax under section 6653(a)(1) and (2)). ^{292011 Tax Ct. Summary LEXIS 7">*53}

Mathematically, 2011 Tax Ct. Summary LEXIS 7">*54 the penalty is 50 percent of the interest payable under section 6601(a) on the amount of the underpayment due to negligence. The amount of interest payable under section 6601(a), for purposes of calculating the penalty against Bang, ran until the tax was assessed on March 27, 2006. The deficiency notice did not notify Bang of the absolute amount of the 50-percent-of-interest penalty because the notice was issued on March 13, 2006, 2 weeks before the interest period closed. See Kamholz v. Commissioner, 94 T.C. 11">94 T.C. 11, 94 T.C. 11">12 (1990) ("In fact, the amount [of the section 6653(a)(2) penalty] could not have been determined when the notice was mailed, since the amount of interest on which it was based had not been finally determined."). But the penalty was certainly invoked in the deficiency notice. The first page of the notice of deficiency (and the waiver form) stated that "50% of interest on $2,636.00" would be due. The "Continuation Sheet" stated that the IRS determined a "fifty (50) percent of the interest due on the part of the underpayment that is due to negligence". It also explained how the penalty was calculated: "The penalty is figured on the earlier of the date of assessment or the date 2011 Tax Ct. Summary LEXIS 7">*55 the tax was paid."

Section 6330(c)(2)(B) provides that a taxpayer may contest the underlying tax liability if the taxpayer "did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability." The question is whether the deficiency notice was "for" Bang's liability for the 50-percent-of-interest negligence penalty. The parties have not pointed us to any legal authority discussing what it means for a statutory notice of deficiency to be "for" a particular tax liability for the purpose of section 6330(c)(2)(B). Besides section 6330(c)(2)(B), there are other provisions that require an evaluation of the relationship between a statutory notice of deficiency and a particular tax liability. Section 7522(a) requires a deficiency notice to "describe the basis for, and identify the amounts (if any) of, the tax due, interest additional amounts, additions to the tax, and assessable penalties included in such notice. An inadequate description under the preceding sentence shall not invalidate such notice." In Burnside v. Commissioner, T.C. Memo. 1994-308, the Tax Court held that a deficiency notice explaining that the IRS 2011 Tax Ct. Summary LEXIS 7">*56 had determined a penalty under section 6653(a)(1)(B), ³⁰ in an amount equal to "50 percent of the interest due on the portion of the underpayment attributable to negligence", was in compliance with section 7522(a).

Rule 142(a) provides that the burden of proof falls on the taxpayer with respect to issues raised in the deficiency notice and falls on the IRS with respect to issues raised in the answer. In Farr v. Commissioner, T.C. Memo. 1993-29, affd. without published opinion 41 F.3d 1513">41 F.3d 1513 (9th Cir. 1994), the IRS issued a notice of deficiency determining an addition to tax equal to "50 percent of the interest due on the portion of the underpayment attributable to negligence pursuant to sec. 6653(a)(1)(B)." The Tax Court held that the taxpayer had the burden of proving she was not liable for the section 6653(a)(1)(B) penalty.

The deficiency notices in Burnside and Farr invoked section 6653(a)(1)(B) using words like those used in the deficiency notice issued to Bang. In each case, this Court held that the liability for the section 6653(a)(1)(B) penalty was sufficiently 2011 Tax Ct. Summary LEXIS 7">*57 described in the deficiency notices for the purpose of the rules at issue in those cases.

The statements in the notice of deficiency explaining the 50-percent-of-interest negligence penalty made the deficiency notice "for" the penalty. Bang "received" the deficiency notice. Therefore, Bang was not entitled to raise a challenge to the amount of the penalty at the collection review hearing. We sustain the Appeals officer's determination with respect to the 50-percent-of-interest penalty.

6. Failure-To-Pay-Tax Penalty

The proposed levy that was sustained by the Appeals officer included, among other things, the amount of $13.18. All we know about this $13.18 is that the same amount was listed on the IRS record of its transactions with Bang for her 1983 income tax year as a failure-to-pay-tax penalty and that it was assessed on June 12, 2006. Two types of failure-to-pay-tax penalties appear in the Internal Revenue Code, section 6651(a)(2) and section 6651(a)(3). Section 6651(a)(2) imposes a penalty for failure to timely pay tax shown on the return on or before the date prescribed for payment. ^{312011 Tax Ct. Summary LEXIS 7">*60} As Bang did pay the tax shown on her 1983 return, the penalty is inapplicable to her. Section 6651(a)(3)2011 Tax Ct. Summary LEXIS 7">*58 imposes a penalty for the failure to timely pay tax that should have been shown on the return if the taxpayer does not pay the tax within 21 days of notice and demand for payment of the tax. ^{322011 Tax Ct. Summary LEXIS 7">*61 2011 Tax Ct. Summary LEXIS 7">*62} Recall that Bang filed her 1983 tax return claiming a $12,500 deduction. Bang paid her tax liability as if she was entitled to the $12,500 deduction. In 2005, the Court in the partnership-level proceeding determined that Bang and the other partners were not entitled to the deductions they had claimed. The IRS issued a deficiency notice to Bang on March 13, 2006. The deficiency notice did not include a determination regarding the failure-to-pay-tax penalty. The IRS assessed the $2,636 increase in tax and the underpayment interest of $21,553.52 on March 27, 2006. Bang paid the $2,636 increase in tax (as well as the 5-percent negligence penalty), and the payment was received by the IRS 4 days later on May 12, 2006; but the record does not state when a notice and demand for payment was issued to collect the $2,636. The IRS assessed a $13.18 failure-to-pay-tax penalty on June 12, 2006 (an amount which is 0.5 percent of $2,636). The IRS then notified Bang on August 23, 2006, that it would levy to 2011 Tax Ct. Summary LEXIS 7">*59 collect an amount that included the $13.18. The Appeals officer refused to consider any of Bang's arguments at the administrative hearing, asserting that all of the arguments were about liability and that the arguments were improper because Bang had a prior opportunity to dispute her liability. The IRS did not explain in its motion for summary judgment why Bang had a prior opportunity to dispute the failure-to-file penalty, or alternatively, why the determination of the Appeals officer should be sustained with respect to the levy of the failure-to-file penalty. Nor did the IRS provide any facts through affidavits or other attachments to its motion that relate to this penalty, such as whether and when the IRS issued a notice and demand for payment of the $2,636. Under these circumstances, we will deny the motion for summary judgment to the extent that it asks us to sustain the determination of the Appeals officer regarding the existence or amount of Bang's liability for the $13.18 failure-to-pay-tax penalty.

Conclusion

Respondent's motion for summary judgment will be granted in part and denied in part.

An appropriate order will be issued.