                               T.C. Memo. 2016-65



                         UNITED STATES TAX COURT



TERRY E. HORNBACKER AND GEORGIA R. HORNBACKER, Petitioners v.
       COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 3622-13.                           Filed April 14, 2016.



      Terry E. Hornbacker and Georgia R. Hornbacker, pro se.

      Michael T. Shelton, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


      PARIS, Judge: Respondent issued notices of final determination denying

petitioners’ claim under section 64041 for abatement of interest on Federal income



      1
       Unless otherwise indicated, all section references are to the Internal
Revenue Code, as amended and in effect at all relevant times, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
                                         -2-

[*2] tax liabilities for 2005 and 2006. Petitioners timely petitioned the Court

under section 6404(h) and Rule 280 seeking review of respondent’s

determination.2 The issue for decision is whether respondent’s denial of

petitioners’ claim for abatement of interest was an abuse of discretion.

                                 FINDINGS OF FACT

      Some of the facts have been stipulated and are so found. The stipulated

facts and facts drawn from the stipulated exhibits are incorporated herein by this

reference. Petitioners resided in Illinois when they filed their petition.

      During the years in issue Mr. Hornbacker owned Public Sector Consulting,

a management consulting business that performed startup analysis, problem

solving, mobile computing solutions, and Internet marketing for small,

independent businesses. Mrs. Hornbacker was a violinist. She performed with an

orchestra, was a music professor, and gave private violin lessons. Mr. Hornbacker

worked from a home office, and Mrs. Hornbacker gave private violin lessons from

a studio in petitioners’ home.




      2
       The notices of determination are dated August 8, 2012. Petitioners had 180
days from the date of the notices of determination to petition the Court; the
deadline was February 4, 2013. Petitioners’ petition was postmarked February 4,
2013. See sec. 7502.
                                          -3-

[*3] I.         The Audit

          The Internal Revenue Service (IRS) selected petitioners’ 2005 and 2006

Federal income tax returns for audit.3 The IRS did not contact petitioners in

writing about the audit before November 1, 2007. Tax Compliance Officer

Valerie Goggil (TCO Goggil) was assigned petitioners’ audit. Her case history

reports (reports) for 2005 and 2006 were entered into evidence.4 TCO Goggil

credibly testified that her schedule was normally “booked 30-45 days” out. This

timeframe had to be taken into account when rescheduling meetings or scheduling

additional meetings with taxpayers.




          3
       It appears from the record that the audits of both returns occurred
concurrently. Petitioners’ 2005 return is stamped “SC 17 NO. 45 AUG 15 2006
[sic] SELECTED FOR EXAM”. Petitioners’ 2006 return is stamped “SC 17 NO.
50 AUG 15 2007 [sic] SELECTED FOR EXAM”. There is no explanation in the
record for the one year between the selection of petitioners’ returns for audit and
the concurrent audits of the returns.
          4
        At the top of the reports Tax Compliance Officer Sandra Theilken (TCO
Theilken) is identified as the examining officer. TCO Goggil testified that she
created the reports and that when TCO Theilken opened the reports for the audit
reconsideration TCO Theilken’s name was automatically inserted as the
examining officer. The IRS no longer uses this procedure because on its server an
audit reconsideration is opened as a new case.
                                        -4-

[*4] TCO Goggil’s first meeting with petitioners was on December 12, 2007.5

Petitioners had a “worksheet” that they offered as substantiation for the expenses

underlying their claimed deductions but provided very little third-party

documentation of their reported expenses at that meeting. Petitioners and TCO

Goggil met again on January 22, 2008. Petitioners brought some documentation

of expenses with them to the second meeting with TCO Goggil but still did not

have much third-party documentation to substantiate their reported expenses.6

Petitioners and TCO Goggil met a third time on February 7, 2008. Petitioners did

not bring any additional substantiation to that meeting.

      On February 11, 2008, on the basis of the third-party documentation that

petitioners had provided, TCO Goggil mailed Form 4549, Income Tax

Examination Changes, to petitioners proposing adjustments to their 2005 and 2006

returns. By letter dated March 11, 2008, petitioners responded to each of the

explanations of items from the Form 4549. By this time TCO Goggil had also


      5
       The report notes for November 6 through December 17, 2007, are entered
on September 8, 2008, with the note: “SOMEHOW NOTES ENTERED FROM
11/06/2007 TO 12/17/2007 WERE DELETED FROM HISTORY. OBTAINED
TIME REPORT FROM SECRETARY. ADDED HERE TO HAVE TIME
BALANCE.”
      6
      Mr. Hornbacker brought his laptop with him to the meeting because he
claimed his substantiation was saved there. TCO Goggil informed him that she
needed hard copies of the substantiation.
                                        -5-

[*5] been assigned a complicated fraud case concerning another taxpayer that

involved 10 years of Federal income tax returns; the case was complicated and

was designated a priority.

      On August 25, 2008, TCO Goggil mailed revised proposed adjustments to

petitioners that took into account new documentation petitioners had provided

with their March 11, 2008, letter. Petitioners did not agree with TCO Goggil’s

revised proposed adjustments. Therefore, on September 8, 2008, TCO Goggil

closed petitioners’ audit because the parties could not agree on the adjustments,

and the file was sent to her manager for review.

      On November 3, 2008, TCO Goggil received petitioners’ file from her

manager with instructions to not allow the additional expenses and to meet with

petitioners to review the proposed adjustments. On November 10, 2008, TCO

Goggil reviewed petitioners’ file, and on November 12, 2008, she again met with

petitioners. At that meeting petitioners produced more documentation to

substantiate their reported expenses. Petitioners and TCO Goggil scheduled an

additional meeting because Mrs. Hornbacker had to leave the November 12, 2008,

meeting early to go to work.

      On December 3, 2008, TCO Goggil met with petitioners for the final time.

At that meeting petitioners refused to sign Form 872, Consent to Extend the Time
                                         -6-

[*6] to Assess Tax, for the years in issue.7 On December 4 and 18, 2008, TCO

Goggil again revised her proposed adjustments and then mailed to petitioners her

final proposed adjustments. After receiving the final proposed adjustments,

petitioners contacted the Taxpayer Advocate Service (TAS).

      On January 5, 2009, TCO Goggil received a letter from TAS, on petitioners’

behalf, requesting a correction to the final revised 30-day letter because of alleged

math errors. TCO Goggil did not make any corrections to her final proposed

adjustments, noting in the report that any math errors were minor, that petitioners

would not sign Form 872, and that she had been lenient during the audit by

allowing petitioners expenses for which they had no third-party substantiation.

TCO Goggil closed the audit and gave her audit file to her manager. Her manager

then forwarded the audit file to Technical Services for preparation and issuance of

a notice of deficiency.

      On January 22, 2009, respondent mailed a notice of deficiency for 2005 and

2006 to petitioners’ last known address. The notice of deficiency was issued

before the expiration of the periods of limitations for both tax years in issue.


      7
        The purpose of Form 872 is often to give the IRS more time to determine
the correct tax liability before the IRS must finalize its determination or lose the
ability to collect any tax. See Abumayyaleh v. Commissioner, T.C. Memo. 2010-
275, slip op. at 6.
                                         -7-

[*7] Petitioners did not petition this Court on the notice of deficiency. On June

15, 2009, the IRS assessed the taxes, penalties, and interest determined in the

notice of deficiency.

II.   The Audit Reconsideration

      On September 24, 2009, petitioners contacted TAS by phone. TAS mailed

petitioners a letter dated September 29, 2009, memorializing that phone

conversation. In the letter TAS confirmed that the IRS had mailed petitioners a

notice of deficiency to their address on record and expressed regret that they “were

not available to sign for the certified letter and that it was returned to the IRS by

the Post Office.” Petitioners responded to TAS by letter dated October 23, 2009,

which states: “This corrected final report[8] was finally delivered to us around

September 30th, [sic] 2009.” They also included additional information to dispute

the final numbers in the corrected final report.

      Approximately one month after petitioners’ letter to TAS, respondent

proposed a collection action against petitioners. They received Notices CP 504

dated November 30, 2009, for 2005 and 2006 informing them that the IRS


      8
       Although it is not entirely clear from the record, it appears that the
“corrected final report” is the Form 4549-A, Income Tax Discrepancy
Adjustments, and accompanying documentation that was included with the notice
of deficiency.
                                         -8-

[*8] intended to levy certain assets because petitioners had not paid their 2005 and

2006 Federal income tax liabilities. They then received Letter 1058, Final Notice

of Intent to Levy and Notice of Your Right to a Hearing, dated March 29, 2010,

for 2005 and 2006. Mrs. Hornbacker acknowledged on cross-examination that

petitioners received the final notice of intent to levy. Petitioners did not request a

collection due process hearing, nor did they respond otherwise to any of the

notices.

      On April 22, 2010, TAS prepared an operations assistance request (OAR)

requesting an audit reconsideration for petitioners’ tax years 2005 and 2006. On

April 27, 2010, a TAS-IRS liaison received the OAR, and on April 28, 2010,

forwarded it to the IRS. On May 6, 2010, the IRS Planning and Special Programs

office processed the OAR and forwarded it to a field examination group for audit

reconsideration.

      On June 3, 2010, petitioners’ audit reconsideration was assigned to TCO

Theilken. The case was not mailed to TCO Theilken until June 11, 2010, because

she was on approved leave during the week of June 7, 2010. On July 1 and 12,

2010, TCO Theilken reviewed petitioners’ audit file and agreed with the original

audit results.
                                        -9-

[*9] She called petitioners and informed Mr. Hornbacker of her determination,

and he asked to speak with her manager. TCO Theilken’s manager called Mr.

Hornbacker and told Mr. Hornbacker that he agreed with TCO Theilken’s

determination. Respondent mailed petitioners a letter dated July 13, 2010,

explaining the outcome of the audit reconsideration.

III.   Appeals

       Petitioners submitted a protest letter dated August 2, 2010, requesting an

appeal of their audit reconsideration determination. Petitioners attached to the

protest letter more substantiation for the expenses underlying their claimed

deductions for 2005 and 2006. On August 12, 2010, TCO Theilken or her manager

reviewed petitioners’ protest letter, and on September 2, 2010, petitioners’ audit

file was forwarded to the IRS Office of Appeals in Chicago (Appeals).

       Appeals mailed petitioners a letter dated November 8, 2010, which

acknowledged receipt of their case on October 26, 2010, and explained what

Appeals does. The letter informed petitioners that if they “wish to stop or reduce

interest on part or all of the proposed balance due, you can make payments

towards the tax at the address listed above.” Appeals Officer Sander (AO Sander)

mailed petitioners a letter dated February 15, 2011, informing them that she had

been assigned to their case and explaining the Appeals process. On February 18,
                                       - 10 -

[*10] 2011, petitioners faxed additional substantiation about individual retirement

account distributions for 2005 and 2006. AO Sander then mailed petitioners a

letter dated March 25, 2011, scheduling a conference with them for April 26,

2011. On March 25 and 26, 2011, petitioners faxed AO Sander Form 5498, IRA

Contribution Information, and Form 1098, Mortgage Interest Statement,

respectively. The information on Form 5498 is handwritten, and the box next to

“CORRECTED” is marked.

      AO Sander mailed petitioners a letter dated May 31, 2011, informing

petitioners that she was “allowing your claim in part” but that they had not “fully

met” their burden for all of their reported expenses. On June 9, 2011, AO Sander

faxed to Mr. Hornbacker a Form 4549 that shows an overpayment of $834 for

2005.9 Petitioners disagreed with AO Sander’s determinations, and on June 22,

June 27, and July 5, 2011, faxed her additional explanations for their claimed

expenses. AO Sander mailed petitioners a letter dated July 6, 2011, “sustaining

the examiner’s determination and allowing an additional deduction for Schedule C




      9
        The first stipulation of facts signed by the parties states: “AO Sander faxed
to petitioners a copy of her revised tax computations. A copy of the computations
is attached as Exhibit 26-J.” Exhibit 26-J includes a Form 4549 for only 2005.
                                          - 11 -

[*11] business expenses as shown on the enclosed report.”10 Petitioners again

disagreed with AO Sander’s determination, and Mr. Hornbacker twice faxed her

additional information on July 7, 2011. AO Sander completed Form 5402,

Appeals Transmittal and Case Memo, dated July 26, 2011, determining that

petitioners were allowed additional deductions claimed on Schedule C, Profit or

Loss From Business, and reducing petitioners’ Federal income tax liabilities by

$834 and $3,609 for 2005 and 2006, respectively. Appeals also created a final

schedule of adjustments on July 26, 2011, adjusting the original assessments

reflected on Form 4549-A from $2,437 to $1,603 for 2005 and $7,218 to $3,609

for 2006. Petitioners’ section 6662 accuracy-related penalties were abated in full.

IV.   Petitioners’ Offers-in-Compromise (OICs)11

      Petitioners’ filed separate Forms, 656-L, Offer in Compromise (Doubt as to

Liability), for 2005 and 2006 dated October 14, 2011. They offered $1,233 and

$1,943 as compromises for their 2005 and 2006 Federal income tax liabilities,

respectively, and remitted these amounts with their OICs.



      10
           Exhibit 30-J includes only the cover letter referencing the report.
      11
        Respondent objected to any evidence about petitioners’ OICs being
entered into evidence on the grounds of relevancy. The Court finds that a
discussion of the OICs is warranted. Therefore, respondent’s objection is
overruled.
                                         - 12 -

[*12] A.     Petitioners’ 2005 OIC

      Petitioners received a letter dated October 31, 2011, informing them that the

IRS had closed the file on their offer for their 2005 tax liability because the IRS

did not have jurisdiction to process the offer “based on the following: We cannot

consider your offer based on Doubt as to Liability, [sic] because you raise no issue

regarding the accuracy of your tax liability.” The letter also informed petitioners

that they would receive a refund of $1,233 in 8 to 10 weeks. Along with the letter

the IRS returned the Form 656-L with the received stamp crossed out and the word

“return” stamped in capital letters at the top of the first page.

      B.     Petitioners’ 2006 OIC

      Respondent received petitioners’ 2006 OIC on October 28, 2011, which

included additional documentation. On April 2, 2012, respondent abated tax of

$617 and reduced or removed late payment interest of $440.42 for 2006.

Petitioners then received a letter dated May 11, 2012, informing them that their

offer for their 2006 tax liability was rejected because “[w]e have partially abated

the original tax assessment. There is no longer a basis for the Offer in

Compromise.” The letter also informs petitioners of their right to appeal the

rejection within 30 days of the date of the letter. Petitioners did not appeal the

rejection, nor did they submit a new OIC after the April 2, 2012, abatement of tax.
                                        - 13 -

[*13] While the letter makes no mention of what was done with the check for

$1,943 petitioners mailed to the IRS with their OIC for 2006, at trial respondent

stated that it was standard practice for the check to be cashed when received and

placed in a “4710 account”12 so that the check would not expire and be rejected by

the bank during the pendency of the OIC. The funds are treated as a deposit

towards the OIC, not a payment. Petitioners did receive a U.S. Treasury check for

$1,943 dated November 19, 2013. As of the time of trial petitioners had not

negotiated the check.13

V.    Petitioners’ Request for Interest Abatement

      Petitioners sent the IRS Form 843, Claim for Refund and Request for

Abatement, dated December 15, 2011. The Form 843 was for 2005 and requested

that $1,706.59 be abated. The Form 843 instructions direct taxpayers to “prepare a

separate Form 843 for each tax period”. There is no Form 843 in the record for

2006, but in their explanation attached to the Form 843, petitioners state: “This

request is in regard to 1040 income tax for 2005 and 2006”. They also request “an

abatement of all interest * * * assessed from April 15, 2006 [sic] to the present.”


      12
       Respondent stated that a 4710 account is “essentially a clearing house
account.”
      13
       There was no testimony about the date of the refund of the $1,233
submitted with the 2005 OIC.
                                        - 14 -

[*14] Petitioners marked the box for “Interest was assessed as a result of IRS

errors or delays”. Petitioners also stated that there was a section 6662 accuracy-

related penalty in issue and marked the box that reasonable cause can be shown for

not assessing the penalty. The section of Form 843 for the “Date(s) of

payment(s)” is blank. The “RECEIVED” stamp on the Form 843 is dated

December 27, 2011.

        Respondent mailed petitioners separate notices of determination disallowing

their requests for abatement of interest for 2005 and 2006, each dated August 8,

2012.

                                      OPINION

        On Form 843, petitioners requested an abatement of interest from April 15,

2006, to “the present”. In their petition, petitioners ask the Court to “waive all

interest and penalties made in this case”.14 The parties stipulated that respondent

did not contact petitioners in writing about the audit of their tax returns before

November 1, 2007. Because the Commissioner may abate interest only for


        14
        “[S]ection 6404 confers no ‘stand alone’ jurisdiction of the Tax Court to
review the Commissioner’s determinations to abate penalties. See sec.
6404(h)(1).” Gray v. Commissioner, 138 T.C. 295, 300 (2012). Even if the Court
had jurisdiction over the penalties here, the IRS had abated them in full in July
2011, well before the petition was filed in this case. Therefore, the Court’s
opinion will only address petitioners’ request for an abatement of interest.
                                        - 15 -

[*15] managerial and ministerial acts performed after the IRS contacts the

taxpayer in writing, the Court will review only petitioners’ request for interest

abatement for managerial and ministerial acts performed after November 1, 2007.

See sec. 6404(e)(1); sec. 301.6404-2(a)(2), Proced. & Admin. Regs.

I.    Abatement of Interest Generally

      For tax years beginning after July 30, 1996, the Commissioner is permitted

to abate interest on any deficiency in tax attributable, in whole or in part, to any

unreasonable error or delay by an IRS officer or employee in performing a

“managerial” or “ministerial” act. Woodral v. Commissioner, 112 T.C. 19, 25

(1999). An error or delay shall be taken into account only if no significant aspect

of the error or delay can be attributed to the taxpayer involved and the error or

delay occurs after the IRS has contacted the taxpayer in writing with respect to the

deficiency or payment. Sec. 6404(e)(1).

      A “managerial” act is an administrative act that occurs during the

processing of a taxpayer’s case and that involves the temporary or permanent loss

of records or the exercise of judgment or discretion relating to personnel

management. Sec. 301.6404-2(b)(1), Proced. & Admin. Regs.

      A “ministerial act” is a procedural or mechanical act that does not involve

the exercise of judgment or discretion and occurs during the processing of a
                                        - 16 -

[*16] taxpayer’s case after all the prerequisites to the act, such as conferences and

review by supervisors, have taken place. See Lee v. Commissioner, 113 T.C. 145,

150 (1999); sec. 301.6404-2(b)(2), Proced. & Admin. Regs. In contrast, a

decision concerning the proper application of Federal tax law or other applicable

Federal or State law is not a managerial or ministerial act. Sec. 301.6404-2(b)(1)

and (2), Proced. & Admin. Regs. The mere passage of time does not establish

error or delay in performing a managerial or ministerial act. See Lee v.

Commissioner, 113 T.C. at 150; Ibrahim v. Commissioner, T.C. Memo. 2011-215

(citing Lee v. Commissioner, 113 T.C. at 150-151). Section 6404(e) is not

intended to be routinely used to avoid payment of interest; rather, Congress

intended that interest be abated “where failure to abate interest would be widely

perceived as grossly unfair.” H.R. Rept. No. 99-426, at 844 (1985), 1986-3 C .B.

(Vol. 2) 1, 844; S. Rept. No. 99-313, at 208 (1986), 1986-3 C.B. (Vol. 3) 1, 208.

      To qualify for abatement of interest under section 6404(e), the taxpayer

must: (1) identify an unreasonable error or delay by the IRS in performing a

ministerial or managerial act; (2) establish a correlation between the error or delay

by the IRS and a specific period for which interest should be abated; and (3) show

that the taxpayer would have paid his or her tax liability earlier but for such error

or delay. Sec. 6404(e)(1); Ibrahim v. Commissioner, T.C. Memo. 2011-215, slip
                                        - 17 -

[*17] op. at 7; Braun v. Commissioner, T.C. Memo. 2005-221, slip op. at 9; sec.

301.6404-2, Proced. & Admin. Regs.; see also Krugman v. Commissioner, 112

T.C. 230, 238 (1999).

        The Court may order an abatement when the Commissioner abused his

discretion in failing to abate interest. Sec. 6404(h)(1). The taxpayer must prove

that the Commissioner exercised his discretion arbitrarily, capriciously, or without

sound basis in fact or law. Lee v. Commissioner, 113 T.C. at 149; Woodral v.

Commissioner, 112 T.C. at 23.

II.     Petitioners’ Actions and Argument

        A.    Statutory Requirements Petitioners Must Meet

        The Court will examine each of the separate requirements petitioners must

meet.

              1.    Identify IRS Error or Delay in Performing a Managerial or
                    Ministerial Act

        The regulations give several examples of managerial and ministerial errors

or delays, ranging from the managerial act of not reassigning an auditor’s cases

after the auditor is permanently reassigned to another group to the ministerial act

of transferring a file. See sec. 301.6404-2(c), Proced. & Admin. Regs.
                                        - 18 -

[*18] Petitioners alleged no specific IRS error or delay in performing a managerial

or ministerial act. Their main argument was that at multiple levels of the audit the

Federal tax laws were improperly applied because by their final Appeals

conference several of their claimed deductions that TCO Goggil disallowed during

the initial audit were allowed. The improper application of Federal tax law during

the course of petitioners’ audit is not a managerial or ministerial act. See id. para.

(b)(1) and (2).

      Petitioners also allege that the IRS lost, and admitted it had lost, their file

for at least two months during the audit. They provided no evidence to

corroborate their allegation. The Court need not accept petitioners’ self-serving

testimony when they fail to present corroborative evidence. See Tokarski v.

Commissioner, 87 T.C. 74, 77 (1986). There is no documentation in any of the

reports in the record of their file being lost. The only indication of any lost

documentation is a note in the reports stating that some of TCO Goggil’s notes had

been deleted and needed to be reentered for timekeeping purposes.

      In fact, the reports show adequate response times by the IRS throughout

petitioners’ audit. TCO Goggil’s schedule was full for 30-45 days, which meant

when petitioners required subsequent meetings they could not be immediately

rescheduled. During petitioners’ audit TCOs Goggil had also been assigned a
                                        - 19 -

[*19] fraud case that took priority over her other cases. The prioritizing of work

and caseloads is not a managerial or ministerial act. Bartelma v. Commissioner,

T.C. Memo. 2005-64; Jacobs v. Commissioner, T.C. Memo. 2000-123. This is

more akin to a general administrative decision. See sec. 301.6404-2(c), Examples

(7) and (8), Proced. & Admin. Regs. TCO Theilken’s and AO Sander’s case file

notes also show that they timely worked on and processed petitioners’ file.

Additionally, the fact that petitioners provided additional third-party substantiation

at almost every meeting throughout the audit and audit reconsideration instead of

substantiating their claimed deductions at the beginning of the audit meant that the

TCOs and the AO working on petitioners’ file had to continually review more

documentation after almost every meeting.

             2.    Establish a Correlation Between the Error or Delay by the IRS
                   and a Specific Period for Which Interest Should Be Abated

      On Form 843 petitioners requested an abatement of interest from April 15,

2006, to “the present”.15 Then in their petition they requested a waiver of “all

interest and penalties made in this case.” Petitioners make no correlation between

any IRS errors or delays in performing managerial or ministerial acts and a

specific period for which interest should be abated. This Court has held that a

      15
        As noted supra respondent did not contact petitioners in writing about
their audit before November 1, 2007.
                                         - 20 -

[*20] request for an abatement of all interest is a request to be exempt from

interest as opposed to an abatement of interest for a specific period. See Braun v.

Commissioner, slip op. at 14; Donovan v. Commissioner, T.C. Memo. 2000-220,

slip op. at 6. Congress did not intend the statute to be used “routinely to avoid

payment of interest”. See H.R. Rept. No. 99-426, supra at 844, 1986-3 C.B. (Vol.

2) at 844; S. Rept. No. 99-313, supra at 208, 1986-3 C.B. (Vol. 3) at 208.

             3.     Show That the Taxpayer Would Have Paid His or Her Tax
                    Liability Earlier but for Such Error or Delay

      Petitioners repeatedly testified that they would have paid their liability

promptly if the IRS had calculated it correctly the first time. While the Court does

not doubt petitioners’ intentions to dutifully pay their fair share of taxes, their

actions throughout the audit belie their words. At every meeting with TCO Goggil

and with Appeals, petitioners continued to provide additional substantiation for

their reported expenses. Had they presented all of the necessary substantiation at

the first and perhaps second meetings with TCO Goggil, the audit would not have

taken as long as it did. Additionally, the notice of deficiency for 2005 and 2006

was issued in a timely manner on January 22, 2009, well within the periods of

limitations for both years.
                                         - 21 -

[*21] B.     Petitioners’ OICs

      Petitioners submitted OICs for 2005 and 2006 on October 14, 2011, for

$1,233 and $1,934, respectively. The IRS rejected both OICs. Petitioners’ 2005

OIC was rejected within three weeks on October 31, 2011, and $1,233 was

refunded to them. Petitioners’ 2006 OIC was rejected on May 11, 2012, and

$1,934 was refunded to them. Petitioners argue that interest should be abated for

the period from the date they filed their OICs to the date the IRS refunded the

amounts they sent with the offers because respondent cashed petitioners’ checks

and because of the amount of time respondent took to reject the 2006 OIC.

      Unless otherwise specified by the taxpayer, amounts submitted with an OIC

are considered deposits. They are not payments of the liability, which would stop

the accumulation of interest on the underlying liability to the extent of the

payment. Goettee v. Commissioner, T.C. Memo. 2003-43 (citing Rosenman v.

United States, 323 U.S. 658, 662 (1945), and Keith v. Commissioner, 35 T.C.

1130, 1136 (1961)), aff’d, 192 F. App’x 212 (4th Cir. 2006); sec. 301.7122-1(h),

Proced. & Admin. Regs. Petitioners did not assert that the amounts submitted

with their OICs were to be applied to the liabilities if their offers were rejected.

Therefore, the amounts submitted with their OICs were deposits supporting their
                                        - 22 -

[*22] offers, and respondent did not have unrestricted use of the money. See

Goettee v. Commissioner, T.C. Memo. 2003-43.

       As stated supra, the mere passage of time does not create a claim for an

abatement of interest. See Lee v. Commissioner, 113 T.C. at 150. Although the

IRS rejected petitioners’ 2005 OIC in a matter of days but did not reject petitioners

2006 OIC for seven months, there was no unreasonable error or delay caused by a

managerial or ministerial act. Respondent acted on the basis of additional

documentation petitioners included with the 2006 OIC and abated previously

assessed tax and reduced or removed late payment interest before the date he

denied the 2006 OIC. The record does not reflect that respondent deviated from

standard IRS procedures in processing petitioners’ OICs. See Chakoian v.

Commissioner, T.C. Memo. 2009-151 (citing Braun v. Commissioner, T.C. Memo.

2005-221). Indeed, the IRS has up to 24 months to process an OIC. See sec.

7122(f); Paneque v. Commissioner, T.C. Memo. 2013-48, at *30 n.30.

III.   Conclusion

       Petitioners have failed to prove that any managerial or ministerial act by the

IRS caused an unreasonable error or delay during the audit of their 2005 and 2006

Federal income tax returns. They have failed to connect any error or delay to a

specific period, instead requesting to be exempt from interest from the time they
                                       - 23 -

[*23] filed their 2005 return until they filed Form 843, and they have failed to

prove that they would have paid their tax liabilities sooner except for the IRS’

error or delay. Additionally, petitioners have failed to prove that any managerial

or ministerial act resulted in an unreasonable error or delay in the IRS’ processing

of their 2005 and 2006 OICs.

      Respondent did not abuse his discretion when he denied petitioners’ request

for an abatement of interest for 2005 and 2006.

      The Court has considered all of the arguments made by the parties, and to

the extent they are not addressed herein, they are considered unnecessary, moot,

irrelevant, or without merit.

      To reflect the foregoing,


                                                      Decision will be entered

                                                for respondent.
