T.C. Memo. 2009-95



                      UNITED STATES TAX COURT



                 THOMAS W. CORSON, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 12491-07.               Filed May 7, 2009.



     Thomas W. Corson, pro se.

     Ric D. Hulshoff, for respondent.



                        MEMORANDUM OPINION


     COHEN, Judge:   This action was commenced under section

6404(h) in response to a final determination by the Appeals

Office that petitioner is not entitled to a full abatement of

interest associated with his 1981 Federal income tax liability.

The case is now before the Court on respondent’s motion for

summary judgment and petitioner’s objection to respondent’s
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motion for summary judgment.    The issue for decision is whether

the Appeals officer abused his discretion in rejecting in part

petitioner’s claim for abatement of interest.     References to

section 6404(a) and (b) are to the Internal Revenue Code in

effect for the year in issue.    References to section 6621(c) are

to section 6621(c) after amendment by the Tax Reform Act of 1986,

Pub. L. 99-514, sec. 1511(a) and (c)(1), 100 Stat. 2744.

References to section 6404(e) are to section 6404(e) before

amendment by the Taxpayer Bill of Rights 2 (TBOR 2), Pub. L. 104-

168, sec. 301, 110 Stat. 1457 (1996).     Unless otherwise stated,

all other section references are to the Internal Revenue Code as

amended, and all Rule references are to the Tax Court Rules of

Practice and Procedure.

                            Background

     Petitioner resided in Arizona at the time his petition was

filed.

     During 1981, petitioner participated in a type of tax

shelter limited partnership arrangement commonly referred to as

“Elektra Hemisphere”.   Petitioner and his then wife filed a joint

Federal income tax return for 1981.     Petitioner and his wife

divorced in 1984.   The Internal Revenue Service (IRS) sent to

petitioner and his ex-wife a joint notice of deficiency for 1981,

in which it determined a $21,711 deficiency that resulted largely

from disallowance of losses relating to petitioner’s investments
                                 - 3 -

in the tax shelter partnership arrangement.    Petitioner and his

ex-wife filed a petition with this Court on July 15, 1985,

contesting the notice of deficiency.

     A test case (Krause/Hildebrand test case) for the over 2,000

Elektra Hemisphere related cases, including petitioner’s case,

was litigated, and the Court held that the related investment

losses were nondeductible.    See Krause v. Commissioner, 

 (1992), affd. sub nom. Hildebrand v. Commissioner, 

 (10th Cir. 1994).     On the basis of the resulting

Krause/Hildebrand test case decisions, petitioner and his ex-wife

stipulated an income tax deficiency of $21,711 for 1981.    The

parties reached a stipulated decision agreement that reflected

this deficiency and, after application of section 6015(c), that

petitioner and his ex-wife each owed one-half of the income tax

deficiency ($10,855.50).

     The stipulated decision agreement also provided that

interest would be assessed as provided by law on the deficiency

and that petitioner waived the restrictions in section 6213(a)

that prohibit assessment and collection of the deficiency and

statutory interest until the decision of the Court becomes final.

The parties further stipulated that the deficiency was a

substantial underpayment attributable to tax-motivated

transactions (TMT), and thus the related interest was to be

calculated by an increased rate pursuant to section 6621(c)
                               - 4 -

(before amendment by the Omnibus Budget Reconciliation Act of

1989 (OBRA), Pub. L. 101-239, sec. 7721(b), 103 Stat. 2399).      The

Court entered the stipulated decision agreement as a decision on

October 3, 2000.

     On March 5, 2001, 153 days after the decision was entered,

the IRS sent to petitioner a Form 3552, Prompt Assessment Billing

Assembly, that notified him of the assessment of $10,855.50 for

the deficiency and $81,394.56 for the related interest that had

accrued as of November 2, 2000.   The Form 3552 did not show the

interest rate or any computation as to how the IRS calculated the

interest charged.   For over 2 years, petitioner tried to obtain

from the IRS a payoff balance that included a computation of

interest, but the IRS did not respond to the request.   The IRS

sent a statement on March 3, 2003, which reflected the $92,250.06

owed and an additional late payment penalty of $1,302.66 but no

computation of interest.

     Through the aid of the Taxpayer Advocate Service, petitioner

finally received a computation of interest on April 7, 2003.      On

April 21, 2003, the IRS received a check from petitioner for

$108,873.24 to pay in full the deficiency and the related

interest as calculated through April 30, 2003.   Along with the

check, petitioner sent a letter dated April 17, 2003, stating

that he retained his right to dispute items with respect to his

payment.
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     On October 3, 2003, petitioner sent to the IRS a Form 843,

Claim for Refund and Request for Abatement.   In his Form 843,

petitioner claimed that all interest for the period from March 5,

2001 to April 7, 2003 ($16,623), should be abated because the IRS

had failed to provide petitioner with proper notice showing the

computation of interest.   Petitioner also claimed any other

interest that had accrued between April 15, 1982 and March 5,

2001, should also be abated for any delays the IRS caused.

     The IRS rejected petitioner’s request and returned it

unprocessed, asserting that

     the Audit of $21,711.00 has been canceled on Mar. 3,
     1986. The interest charges for that Audit of
     $13,143.45 were also cancelled [sic] at the same time.
     There is no interest charged on this tax year [1981],
     the account is in zero balance due.

Petitioner, responding through a certified letter, requested

either a refund of his payment or the processing of his Form 843.

The IRS did not respond to this letter.   On May 5, 2005,

petitioner filed a Form 911, Application for Taxpayer Assistance

Order, wherein he again sought either a refund or the processing

of his Form 843.   On June 29, 2005, the IRS denied any errors or

delays on its part and ultimately denied any abatement of

interest.   Petitioner sent a request for appeal of the IRS’s

determination on July 15, 2005.

     On December 8, 2006, the Appeals Office sent to petitioner a

Partial Allowance--Final Determination letter wherein $23,078.93
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was abated from the $98,017.74 total interest that had accrued as

of April 21, 2003.   The letter detailed the abatement as follows:

                 Period                  Abatement of Interest

    June 30, 1994 to June 30, 1995             $6,455.75
    March 5, 2001 to April 30, 2003            16,623.18

The balance of petitioner’s abatement of interest request,

however, was disallowed because the Appeals officer could find no

errors or delays on the IRS’s part for the periods from April 15,

1982 to June 29, 1994, and July 1, 1995 to March 4, 2001.    The

letter did not contain any specific information as to why the

Appeals officer granted or denied abatement for the different

periods.

     Within a Case Memorandum dated November 29, 2006, however,

the Appeals officer explained his analysis and recommendation for

partial abatement.   In making his decision, he reviewed all

available information and considered all concerns voiced by

petitioner.   The Appeals officer abated interest for the period

from March 5, 2001 to April 30, 2003 because he determined that

the failure to provide petitioner with the requested interest

computation and current payoff was an “unreasonable delay by an

officer or employee of the IRS in performing a ministerial act.”

The Appeals officer found that the IRS caused no delay from July

15, 1985 through January 3, 1991, and May 17, 1996 through

October 3, 2000, because Court records showed significant

activity taking place during that time with respect to
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petitioner’s cases.   He also found that the period of accrual

caused by the pendency of the Krause/Hildebrand test case, which

was decided on appeal in June 1994, was not due to the delay of

any ministerial act of the IRS.

     The Appeals officer thus determined that the only

unexplained gap in time was from June 1994 until May 17, 1996,

during which there was no Court activity and no record of IRS

activity.   However, the Appeals officer also concluded that some

actions with respect to the Court proceedings and settlement

deliberations must have occurred during the unexplained 2-year

period, even though none were reflected in the materials he

reviewed.   The Appeals officer allowed a 1-year period of

abatement of interest for petitioner, which he designated to be

from June 30, 1994 to June 30, 1995.

                            Discussion

     Under Rule 121, a summary adjudication may be made

     if the pleadings, answers to interrogatories,
     depositions, admissions, and any other acceptable
     materials, together with the affidavits, if any, show
     that there is no genuine issue as to any material fact
     and that a decision may be rendered as a matter of law.
     A partial summary adjudication may be made which does
     not dispose of all the issues in the case. [Rule
     121(b).]

For reasons set forth below, we conclude that there is no genuine

issue as to any material fact.

     Petitioner bears the burden of proof.   See Rule 142(a).

However, respondent is in the best position to know what actions
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were taken by IRS officers and employees during the period for

which a taxpayer’s abatement request was made and during any

subsequent inquiry based upon that request.    See Jacobs v.

Commissioner, T.C. Memo. 2000-123.     To prove that abatement of

interest is appropriate, a taxpayer must identify an error or

delay caused by a ministerial act on the part of the IRS and must

directly link the mistake to a specific time period during which

interest accrued.   Sec. 6404(e); accord Guerrero v. Commissioner,

T.C. Memo. 2006-201; Braun v. Commissioner, T.C. Memo. 2005-221.

     Petitioner contends that the Appeals officer’s final

determination, denying abatement of interest for the periods

April 15, 1982 to June 29, 1994, and July 1, 1995 to March 4,

2001, was an abuse of discretion.    Petitioner seeks judicial

review under section 6404(h)(1) and Rule 280(b) for abatement of

the remaining interest of $74,938.81.    Respondent argues that the

Appeals officer did not abuse his discretion and denies that any

errors or delays occurred on the part of the IRS during these

periods with respect to the interest assessed.

     The Court may order an abatement if it was an abuse of

discretion to refuse to abate interest in the final

determination.   Sec. 6404(h)(1); see Hinck v. United States, 

, 506 (2007) (holding that the Tax Court provides the

exclusive forum for judicial review of the IRS’s refusal to abate

interest).   In order to prevail, a taxpayer must prove that the
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Appeals officer acted arbitrarily, capriciously, or without sound

basis in fact or law.   See Woodral v. Commissioner, 

,

23 (1999).

     Petitioner raises four arguments to show an abuse of

discretion by the Appeals officer:     (1) Failure to abate interest

because the IRS failed timely to assess the interest; (2) failure

to abate interest caused by the IRS’s erroneous application of

the section 6621(c) 120-percent TMT interest rate; (3) failure to

abate interest that accrued because the IRS delayed in applying

the Krause/Hildebrand test case decisions to petitioner’s case;

and (4) failure to investigate, review, or abate interest for any

other periods during the time petitioner’s case was pending.     We

address each of petitioner’s arguments.

1. Error of Untimely Assessment

     Petitioner alleges in his petition that the IRS made an

untimely assessment after the decision entered by this Court on

October 3, 2000.   As a result, he asserts that “the principal and

interest due” should have been abated by the Appeals officer.

Respondent originally viewed this allegation as merely referring

to a delay in assessment despite the section 6213(d) waiver

paragraph in the stipulated settlement.    After further discussion

with petitioner, however, respondent now understands petitioner’s

argument to encompass more than just a delay in the assessment.

Rather, petitioner claims that the period of limitations on
                                - 10 -

assessment of the deficiency expired before the assessment.       See

sec. 6501(a).    Thus, he asserts, the deficiency and the interest

that stems from it should be abated because section 6404(a)(2)

provides that the Commissioner is authorized to abate a tax

liability that is assessed after the expiration of the period of

limitations.     Alternatively, petitioner argues that material

facts, such as the dates of the notice of deficiency and the

assessment of interest, are in issue.

     Respondent contends that section 6404(b) precludes

petitioner from requesting abatement with regard to an assessment

of an income tax except as provided by section 6404(e).    Because

petitioner is prohibited in this manner, respondent argues that

“the Tax Court lacks jurisdiction to consider petitioner’s

Statute of Limitations argument.”

     The Court has jurisdiction under section 6404(h) to review

the Commissioner’s failure to abate interest under all

subsections of section 6404, and our jurisdiction is not limited

to reviewing only cases under section 6404(e).     Woodral v.

Commissioner, supra at 22-23.     However, section 6404(h) does not

authorize us to decide whether the underlying deficiency was

properly assessed in order to determine whether interest should

be abated.     See Kosbar v. Commissioner, T.C. Memo. 2003-190.

Given that this case is one “in respect of an assessment of * * *

[income] tax imposed under subtitle A”, petitioner does not
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qualify for an abatement of interest under section 6404(a)(2).

Sec. 6404(b); Corson v. Commissioner, 

, 207 n.6

(2004); Asciutto v. Commissioner, T.C. Memo. 1992-564, affd. per

order 

 (9th Cir. 1994).      Because section 6404(b)

applies, any dispute as to the factual dates of events that might

determine the expiration of the period of limitations on

assessment is not dispositive.

     Section 6404(e)(1) provides in part:

          (1) In general.--In the case of any assessment of
     interest on--

               (A) any deficiency attributable in whole or
          in part to any error or delay by an officer or
          employee of the Internal Revenue Service (acting
          in his official capacity) in performing a
          ministerial act, or

               (B) any payment of any tax described in
          section 6212(a) to the extent that any error or
          delay in such payment is attributable to such
          officer or employee being erroneous or dilatory in
          performing a ministerial act,

     the Secretary may abate the assessment of all or any
     part of such interest for any period. * * *

(Amendments enacted in 1996 expanded the scope of section 6404(e)

to include “managerial” as well as ministerial acts, and they

qualified that the error or delay be “unreasonable”.      See TBOR 2,

sec. 301(a), 110 Stat. 1457.     Because these amendments are not

effective retroactively for tax years beginning before August 1,

1996, they do not apply to the instant case.      While the Appeals

officer made his determination using an “unreasonable” standard
                                - 12 -

for the errors and delays examined, that erroneous standard was

never a deciding factor in his review.)

        The term “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.     Sec. 301.6404-2T(b)(1), Temporary

Proced. & Admin. Regs., 52 Fed. Reg. 30163 (Aug. 13, 1987).

(While the final regulations under section 6404 were issued on

Dec. 18, 1998, they generally apply to interest accruing on

deficiencies or payments of tax for tax years beginning after

July 30, 1996, and, therefore, are inapplicable to the instant

case.     See sec. 301.6404-2(d), Proced. & Admin. Regs.; see also

sec. 301.6404-2T(c), Temporary Proced. & Admin. Regs., 52 Fed.

Reg. 30163 (Aug. 13, 1987) (effectuating the temporary

regulations cited for taxable years beginning after Dec. 31, 1978

(but on or before July 30, 1996)).

     The assessment of tax, including interest pursuant to

section 6601(e), is a procedural action that does not require the

use of judgment or discretion, much like the issuance of a notice

of deficiency.     See Corson v. Commissioner, supra at 208.   In

Fruit of the Loom, Inc. v. Commissioner, T.C. Memo. 1994-492,

affd. 

 (7th Cir. 1996), we observed that

“[a]ssessment is the ministerial act of recording a taxpayer's
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Federal tax liability in the office of the District Director.”

Therefore, the assessment of petitioner’s interest is a

ministerial act and qualifies for review under section 6404(e).

     In his examination of petitioner’s case, the Appeals officer

considered both the assessment issue and the period between the

entered decision and the assessment date.   He found no

“unreasonable error or delays” by the IRS in making the

assessment.

2. Error in Applying Section 6621(c) TMT Interest Rate

     Petitioner’s second argument is that the Appeals officer

should have abated a portion of the interest because the IRS

erred in applying the section 6621(c) TMT interest rate.

     Section 6621(c) applies an increased rate of interest on

substantial underpayments of tax resulting from tax-motivated

transactions.   (Sec. 6621(c) was repealed as of Dec. 31, 1989, by

OBRA, sec. 7721(b), 103 Stat. 2399.)   Application of this section

to Elektra Hemisphere investors was upheld by the Court of

Appeals for the Ninth Circuit in Hill v. Commissioner, 

, 1219-1221 (9th Cir. 2000) (following Hildebrand v.

Commissioner, 

 (10th Cir. 1994)).   A decision

concerning the proper application of Federal tax law is not a

ministerial act.   Sec. 301.6404-2T(b)(1), Temporary Proced. &

Admin. Regs., supra.   As the application of section 6621(c) is an

application of Federal tax law, petitioner’s argument fails.     The
                                - 14 -

Appeals officer did not abuse his discretion in denying abatement

with respect to the section 6621(c) TMT interest rate.

3. Delay in Applying Krause/Hildebrand

     Petitioner’s third argument is that the Appeals officer

failed to abate all interest for the period during which the IRS

delayed applying the final result of the Krause/Hildebrand test

case to petitioner’s case.    The Appeals officer, in considering

petitioner’s concern, determined this period to be from

approximately June 1994, the month the Krause/Hildebrand test

case was decided on appeal, until October 3, 2000, the day the

stipulated settlement was entered as a decision in petitioner’s

earlier Court case.    The Appeals officer determined that the only

unexplained gap within this period was from June 1994 until May

17, 1996, because there was no record of Court or IRS activity

during this timeframe.     Even after determining a gap, however,

the Appeals officer still believed that some actions arising from

Court proceedings and settlement deliberations must have occurred

during that time.     Weighing the argument and considering Jacobs

v. Commissioner, T.C. Memo. 2000-123, the Appeals officer allowed

a 1-year period of abatement of interest, which he designated to

be from June 30, 1994 to June 30, 1995.

     Petitioner argues that this period of abatement should be

greater in scope because of the recognized “delay” in applying

the Krause/Hildebrand test case final decision to his case.
                                - 15 -

However, the mere passage of time during the litigation phase of

a tax dispute does not establish error or delay by the

Commissioner in performing a ministerial act.     Lee v.

Commissioner, 

, 150 (1999); see Beagles v.

Commissioner, T.C. Memo. 2003-67.    Respondent's decision on how

to proceed in the litigation phase of the case necessarily

required the exercise of judgment and is not a ministerial act.

See Lee v. Commissioner, supra at 150-151.     The Appeals officer

acted within his discretion in granting this 1-year abatement,

and respondent does not contest his decision.    Petitioner has not

established that greater abatement is justified.    See Beagles v.

Commissioner, supra.

4. Any Other Delay

     Petitioner’s last argument is that the Appeals officer

failed to investigate, review, or abate interest for any other

periods during the time his case was pending in this Court.

     Section 6404(e) is not intended to be routinely used to

avoid payment of interest; rather, Congress intended 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.     A request demanding abatement of all interest

charged does not satisfy the required link; it merely represents

a request for exemption from interest.     See Braun v.
                             - 16 -

Commissioner, T.C. Memo. 2005-221.     Such a broad claim extends

beyond the intention of the statute.    See H. Rept. 99-426, supra

at 844, 1986-3 C.B. (Vol. 2) at 844; S. Rept. 99-313, supra at

208, 1986-3 C.B. (Vol. 3) at 208.    The Appeals officer’s

determination not to abate interest based on petitioner’s blanket

request was not an abuse of discretion.     See Donovan v.

Commissioner, T.C. Memo. 2000-220.

     Taking into account all the facts and circumstances of this

case, we hold that the Appeals officer erred as a matter of law

in denying petitioner’s request for an abatement of interest with

respect to the period of November 2, 2000 to March 4, 2001,

because of a belated assessment under section 6601(c).       The

Appeals officer’s determination is otherwise sustained.      In

reaching our decision, we have considered all arguments made,

and, to the extent not mentioned, we conclude that they are

irrelevant, moot, or without merit.

     To reflect the foregoing,


                                        An appropriate order and

                                 decision for respondent will be

                                 entered.