                        T.C. Memo. 2002-266



                      UNITED STATES TAX COURT



             DENNY’S AUTO SALES, INC., Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11150-01.             Filed October 18, 2002.


     Ronald Lawson and Dennis F. Lawson (officers), for

petitioner.

     John A. Freeman and Robert D. Kaiser, for respondent.



                        MEMORANDUM OPINION


     THORNTON, Judge:   Respondent issued a notice of final

determination denying petitioner’s request to abate interest for

its 1995 tax year.   Petitioner timely filed a petition pursuant
                               - 2 -

to section 6404(i) and Rule 280.1    The sole issue for decision is

whether respondent abused his discretion in denying petitioner’s

request for abatement of interest.

                            Background

     The parties have stipulated some of the facts, which we

incorporate in our findings by this reference.    Petitioner is a

Kentucky corporation.   When the petition was filed, petitioner’s

principal place of business was in South Shore, Kentucky.

     On its 1995 Form 1120, U.S. Corporation Income Tax Return,

petitioner claimed a $188,660 depreciation deduction with respect

to certain used cars that were part of its car-rental program

(the used cars).   In calculating this depreciation deduction,

petitioner assigned the used cars zero salvage value.

     On June 18, 1997, respondent’s revenue agent first contacted

petitioner concerning its 1995 Federal income tax return.    On

July 14, 1998, the revenue agent issued her report, proposing

that petitioner’s claimed depreciation deduction should be

reduced by $166,358, based on her conclusion that the salvage

value of the used cars was 89 percent of original cost.

     On February 16, 1999, respondent granted petitioner’s

request for an Appeals conference.     On or about January 10, 2000,

petitioner and the Appeals officer reached a settlement, agreeing


     1
       Unless otherwise stated, all section references are to the
Internal Revenue Code as amended, and all Rule references are to
the Tax Court Rules of Practice and Procedure.
                               - 3 -

that the used cars should be assigned a 20-percent salvage value.

The settlement resulted in a 1995 deficiency of $9,030 (after

application of a 1998 net operating loss carryback).   On May 22,

2000, respondent assessed $8,535.33 of interest on the 1995

deficiency.   On June 16, 2000, petitioner paid the 1995

deficiency, exclusive of interest.

     On September 18, 2000, petitioner filed a Form 843, Claim

for Refund and Request for Abatement, requesting abatement of

$5,210.10 of the then-accrued interest.   By way of explanation,

petitioner stated on the Form 843:

     The taxpayer believes a reasonable period to resolve
     the issue should have been one year. Therefore, the
     taxpayer [requests] an abatement of the interest in the
     amount of $5,210.10. Leaving a balance due of
     $3,437.40. This amount represents a reasonable amount
     of interest on the balance owed of $9,030.

On February 1, 2001, petitioner paid $3,473.40 of the interest.

       On July 13, 2001, respondent issued a Notice of Final

Determination disallowing petitioner’s request for abatement of

interest.

                            Discussion

     Under section 6404(e)(1), the Secretary may abate interest

on any deficiency or payment of income, gift, estate, and certain

excise taxes to the extent that the deficiency or any error or

delay in such payment is attributable to erroneous or dilatory

performance of a ministerial act by an officer or employee of the
                               - 4 -

Internal Revenue Service (IRS).2   Such an error or delay in

performing a ministerial act is taken into account only if it is

in no significant aspect attributable to the taxpayer and only if

it occurs after the IRS has contacted the taxpayer in writing

regarding the deficiency or payment.

     Congress did not intend section 6404(e) to be “used

routinely to avoid payment of interest”; rather, it is to be

“utilized in instances where failure to abate interest 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

(1985), 1986-3 C.B. (Vol. 3) 1, 208.

     For interest abatement claims made after July 30, 1996, the

Tax Court has jurisdiction to determine whether the

Commissioner’s failure to abate interest under section 6404(e)

was an abuse of discretion.   See sec. 6404(i)(1);3 Woodral v.

Commissioner, 112 T.C. 19, 23 (1999).

     In the petition, petitioner contends that respondent took an

“excessive amount of time in concluding the audit” and argues


     2
       In 1996, sec. 6404(e) was amended to permit abatement of
interest for “unreasonable” error or delay resulting from the
performance of ministerial or “managerial” acts. Taxpayer Bill
of Rights 2, Pub. L. 104-168, sec. 301(a)(1) and (2), 110 Stat.
1457 (1996). The amendment applies to tax years beginning after
July 30, 1996. Id. at sec. 301(c), 110 Stat. 1457. Therefore,
the amendment is inapplicable to the instant case.
     3
       Sec. 6404(i) was redesignated sec. 6404(h) by the Victims
of Terrorism Tax Relief Act of 2001, Pub. L. 107-134, sec.
112(d)(1)(B), 115 Stat. 2434-2435.
                              - 5 -

that “if the IRS had not taken such an unreasonable position in

the beginning of the audit, then the delays on their part would

have been drastically reduced”.   The mere passage of time,

however, does not establish that the Commissioner has erred or

delayed in performing a ministerial act.   See Lee v.

Commissioner, 113 T.C. 145, 150 (1999).    Similarly, the actions

of respondent’s agents in applying Federal tax law to

petitioner’s facts and circumstances required the exercise of

judgment and discretion and so did not constitute ministerial

actions that could provide a basis for abating interest.    See

sec. 301.6404-2T(b)(1), Temporary Proced. & Admin. Regs., 52 Fed.

Reg. 30163 (Aug. 13, 1987).

     At trial, petitioner’s certified public accountant, Gary

Fyffe (Fyffe), testified that on several occasions he requested,

on petitioner’s behalf, a meeting with the revenue agent’s group

manager to discuss the revenue agent’s proposed adjustments.

Fyffe testified that “basically I was told that * * * I wasn’t

going to get the meeting for different reasons, but * * * the

reason I remember most was for some reason she wasn’t available.”

Having failed to obtain a meeting with the group manager,

petitioner requested and received an Appeals conference.    Fyffe

opined that because the salvage value used by the revenue agent

was “flawed”, petitioner “would have probably been a little more
                                - 6 -

successful as far as getting a more reasonable adjustment” if the

case had been reviewed by a group manager.

     Petitioner contends that the group manager’s failure to meet

with Fyffe to discuss the revenue agent’s proposed adjustments

constituted error in performing a ministerial act.   In support of

this contention, petitioner relies on Internal Revenue Manual

section 4255.1(2)(b), which states:

          If the taxpayer disagrees with the proposed
     changes, either by letter or in person at the
     originating office, the group manager, will on a
     priority basis, and at his/her discretion, discuss the
     disputed adjustments with the taxpayer in a further
     attempt to resolve the issues and obtain the taxpayer’s
     agreement. * * * [1 Audit, Internal Revenue Manual
     (CCH), sec. 4255.1(2)(b), at 7709; emphasis added.]

     This provision of the Internal Revenue Manual plainly

indicates that the group manager’s discussion of disputed

adjustments with the taxpayer is discretionary.   Accordingly, the

nonoccurrence of such a discussion does not establish error in

performing a ministerial act.

     In any event, we cannot assume that a meeting with the group

manager, if it had occurred, would have accelerated, rather than

protracted, resolution of petitioner’s tax controversy.   It is

purely conjectural whether the group manager would have resolved

the disputed issue any more expeditiously than the Appeals

officer or any more to petitioner’s satisfaction; we cannot

assume that, even after meeting with the group manager,

petitioner would not have requested an Appeals conference, or
                              - 7 -

that the final outcome of this more protracted administrative

proceeding would have been any more in petitioner’s favor.

Accordingly, there is no basis to conclude that any of the

interest on petitioner’s 1995 deficiency was attributable to the

group manager’s failure to meet with petitioner.

     In sum, the record does not show that there was any

erroneous or dilatory performance of a ministerial act by

respondent that caused or contributed to the delay in

petitioner’s payment of the 1995 tax liability.    Consequently,

respondent’s denial of petitioner’s request to abate interest

under section 6404 was not an abuse of discretion.


                                      Decision will be entered

                              for respondent.
