                          T.C. Memo. 2002-259



                      UNITED STATES TAX COURT



                MAURICE W. SPIEGEL, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 619-00.                Filed October 9, 2002.



     Maurice W. Spiegel, pro se.

     Leonard T. Provenzale, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     COLVIN, Judge:   Respondent issued a final determination

disallowing petitioner’s claim under section 6404(e) to abate

interest related to petitioner’s 1987, 1989, 1991, and 1992 tax
                                - 2 -

years.1    Petitioner timely filed a petition under section

6404(g)2 and Rule 280.

     The sole issue for decision is whether respondent’s denial

of petitioner’s request to abate interest relating to his 1989,

1991, and 1992 tax years was an abuse of discretion.    We hold

that it was not.

     Section references are to the Internal Revenue Code as

amended.    Rule references are to the Tax Court Rules of Practice

and Procedure.

                          FINDINGS OF FACT

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

A.   Petitioner and the $150,000 Estimated Tax Payment

     Petitioner resided in Boca Raton, Florida, when he filed his

petition.    He is a retired attorney.

     On April 15, 1986, petitioner paid $150,000 in estimated tax

to respondent from his and his wife’s joint checking account.

Respondent credited the payment to petitioner’s 1986 tax year.


     1
        Respondent concedes that the statute of limitations on
collections bars respondent from collecting any tax liability for
petitioner’s 1987 tax year. Thus, abatement of interest
associated with petitioner’s 1987 tax year is moot.
     2
        This was redesignated sec. 6404(i) by the Internal
Revenue Service Restructuring and Reform Act of 1998, Pub. L.
105-206, secs. 3305(a), 3309(a), 112 Stat. 685, 743, 745.

     Sec. 6404(i) was later redesignated sec. 6404(h) by the
Victims of Terrorism Relief Act of 2001, Pub. L. 107-134, sec.
112(d)(1)(B), 115 Stat. 2427, 2434-2435.
                                - 3 -

B.   Petitioner’s Separation and Filing of Separate Returns

     Petitioner and his wife separated in September 1986.     They

filed separate returns for 1986 and 1987.

     Petitioner reported a tax liability of $11,985 on his 1986

return.    In 1987, petitioner requested that respondent:   (1)

Credit $11,985 of the $150,000 payment to his liability for 1986;

(2) credit $70,000 to his estimated tax for 1987; and (3) refund

$68,015.    On November 23, 1987, respondent (1) credited $70,000

to petitioner’s tax liability for 1987, and (2) refunded $68,015

to petitioner.

C.   Respondent’s 1988 Reallocation of the $150,000 Payment

     As of April 1988, respondent had credited $81,985 of the

$150,000 payment to petitioner’s 1986 and 1987 tax years and

refunded $68,015 to petitioner.    Despite that, in April 1988, the

accountant for petitioner’s wife asked respondent to allocate the

$150,000 payment in proportion to the tax liability of each

spouse for 1986.    In April or May 1988, respondent allocated

$14,471.10 of the $150,000 estimated tax payment to petitioner

and $135,582.90 to his wife.    Respondent’s position now is that

the $68,015 refund was erroneous, but that the time provided to

respondent under section 6532(b) to sue to recover an erroneous

refund has expired.
                               - 4 -

D.   Petitioner’s Tax Returns for 1987-92

     Petitioner filed his 1987 Federal income tax return on

October 14, 1988.   On it, he claimed that he should be credited

with a $70,000 estimated tax payment which he believed had been

carried forward from the $150,000 payment.    However, because

respondent had reallocated the $150,000 estimated tax payment

between petitioner and his wife as described above, respondent

disallowed petitioner’s carryover of the $70,000 credit from the

$150,000 payment.

     Petitioner filed tax returns for 1988 through 1992 on which

he carried forward estimated tax payments as follows:

          Year                Claimed estimated tax payments
                                       carryforward
          1988                              $62,592
          1989                               62,592
          1990                               52,799
          1991                               52,799
          1992                               45,314

     Respondent disallowed petitioner’s carryovers of estimated

tax payments to tax years 1988, 1989, 1991, and 1992 because

respondent had reallocated most of the $150,000 tax payment to

petitioner’s wife, leaving nothing for petitioner to carry

forward to those years.   Respondent assessed additional taxes for

petitioner for 1989 on September 14, 1992.
                                 - 5 -

E.   Petitioner’s Divorce Agreement

     Petitioner and his wife signed a “Stipulation and

Agreement,” dated January 30, 1989.      Article 6.6 of that

agreement permitted the parties to retain any refund on separate

returns they filed.   Petitioner and his wife had no agreement to

allocate estimated tax payments.    Petitioner and his wife were

divorced in May 1989.

F.   Respondent’s Levy on Petitioner’s Keogh Account

     On October 13, 1993, respondent levied $14,246.41 from

petitioner’s Keogh account and credited that amount to

petitioner’s 1985 tax year.    Also on October 13, 1993, respondent

subtracted $14,246.41 from the amount credited to petitioner’s

1985 tax year and credited that amount to his 1989 tax year.

G.   Petitioner’s Claim for Refund

     Petitioner filed a claim for a $57,532.41 refund for 1992 on

September 28, 1995.     He calculated that amount by reducing the

$70,000 estimated tax payment by his tax liabilities of $7,408

for 1987, $9,886 for 1989, $7,485 for 1991, $2,351 for 1992, and

then increasing the balance by $93 for withholding in 1989 and by

$14,246.41 and $343 for levies on Keogh and bank accounts in

1993.3   Respondent denied petitioner’s claim on May 15, 1996.


     3
        We note that the correct balance after decreases for
petitioner’s tax liabilities and increases for withholdings
levies would be $57,552.41, if the $70,000 estimated tax payment
were available as a carryover.
                               - 6 -

H.   Respondent’s Communication With Petitioner in 1998 Regarding
     Respondent’s 1988 Reallocation of the $150,000 Payment

     On July 28, 1998, respondent told petitioner by letter that

respondent had reallocated the $150,000 payment in proportion to

the tax liability for 1986 of petitioner and his former wife and

that, as a result, petitioner had unpaid tax liabilities for

1987, 1989, 1991, and 1992.   The record does not show whether

petitioner knew before July 28, 1998, that respondent had

reallocated the $150,000 payment.

I.   Tax Collection Waiver and Respondent’s Final Determination

     On October 15, 1998, petitioner signed a Form 900, Tax

Collection Waiver, in which he agreed to extend to December 31,

2000, the period for respondent to collect tax that respondent

had assessed on December 19, 1988, for 1987, and on November 19,

1990, for 1989.

     On August 12, 1999, respondent issued a final determination

denying petitioner’s claim to abate interest under section

6404(e).

                              OPINION

A.   Background

     The Commissioner may abate part or all of the interest

assessed on any deficiency or payment of income, gift, estate,

and certain excise tax to the extent that any error or delay in

payment is attributable to erroneous or dilatory performance of a

ministerial act by an officer or employee of the Commissioner if:
                              - 7 -

(1) The erroneous or dilatory ministerial act occurred after the

Commissioner notified the taxpayer in writing about the

deficiency or payment, and (2) the taxpayer did not contribute

significantly to the error or delay.   Sec. 6404(e)(1).4


     4
        Sec. 6404(e)(1) as enacted in 1986 and as applicable here
provides:

          SEC. 6404(e). Assessments of Interest Attributable
     to Errors and Delays by Internal Revenue Service.--

               (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.
          For purposes of the preceding sentence, an
          error or delay shall be taken into account
          only if no significant aspect of such error
          or delay can be attributed to the taxpayer
          involved, and after the Internal Revenue
          Service has contacted the taxpayer in writing
          with respect to such deficiency or payment.

     Congress amended sec. 6404(e) in 1996 to permit abatement of
interest for “unreasonable” error and delay in performing a
                                                   (continued...)
                                 - 8 -

A ministerial act is a procedural or mechanical act that does not

involve the exercise of judgment or discretion by respondent.

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

Reg. 30163 (Aug. 13, 1987).     The Tax Court has jurisdiction to

review whether the Commissioner’s failure to abate interest was

an abuse of discretion.   Sec. 6404(g)(1); Krugman v.

Commissioner, 112 T.C. 230, 239 (1999); Woodral v. Commissioner,

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

B.   Petitioner’s Contentions

     Petitioner contends that respondent’s denial of his request

to abate interest on his tax liability for 1989, 1991, and 1992

was an abuse of discretion.   Petitioner alleges that respondent:

(1) Incorrectly allocated part of the $150,000 estimated tax

payment to his spouse; (2) illegally levied petitioner’s Keogh

account on August 30, 1993; (3) erroneously applied funds taken

by levy to petitioner’s 1985 taxable year; and (4) improperly

applied petitioner’s tax collection waiver to a 1992 assessment

for the 1989 tax year.

     Respondent contends that there were no errors or delays due

to ministerial acts by respondent and that respondent’s refusal


     4
      (...continued)
“ministerial or managerial” act. Taxpayer Bill of Rights 2 (TBOR
2), Pub. L. 104-168, sec. 301(a), 110 Stat. 1452, 1457 (1996).
That standard first applies to tax years beginning after July 30,
1996, TBOR 2, sec. 301(c), 110 Stat. 1457, and thus does not
apply in the instant case.
                                 - 9 -

to abate interest was not an abuse of discretion.

     1.   Whether Respondent’s Refusal To Abate Interest That
          Accrued as a Result of Respondent’s Reallocation of the
          $150,000 Estimated Tax Payment Was a Ministerial Error

     Petitioner points out that he timely paid tax for 1989,

1991, and 1992, and that respondent assessed interest only

because respondent reallocated most of the $150,000 estimated tax

payment to his former wife.   Petitioner contends that the

reallocation was a ministerial error.    We disagree.

     Petitioner’s wife asked respondent to reallocate the

$150,000 payment between petitioner and herself. Respondent told

petitioner that the reallocation was based on tax liabilities

reported on their separate 1986 returns.    Respondent’s

reallocation of the estimated tax payment required the exercise

of judgment in evaluating petitioner’s wife’s claim, and deciding

whether and how much to allocate to each spouse.    Respondent’s

refusal to abate interest that accrued as a result of that

decision was not ministerial.5


     5
        Since respondent’s reallocation of the $150,000 estimated
tax payment was not ministerial, we need not decide if it was an
error. Compare Gordon v. United States, 757 F.2d 1157, 1160
(11th Cir. 1985), and Gens v. United States, 230 Ct. Cl. 42, 673
F.2d 366, 368 (1982) (overpayment allocated between spouses in
proportion to their tax payments), with Bloomfield v.
Commissioner, 52 T.C. 745, 752 (IRS properly allocated refund of
overpayment on a joint return to wife; husband’s redress lies in
suit against her for contribution). If respondent seeks payment
through use of lien or levy procedures of any amount owing from
petitioner as a result of respondent’s reallocation of
petitioner’s $150,000 payment, petitioner may be able to obtain
judicial review of that issue (1) on a prepayment basis in a
subsequent collection action in this Court under sec. 6330, or
                                                   (continued...)
                                 - 10 -

     2.      Whether Petitioner Is Entitled to Abatement of Interest
             as a Result of (a) Respondent’s Levy on Petitioner’s
             Keogh Account; (b) Respondent’s Initial Crediting of
             the Levied Funds to 1985; or (c) Petitioner’s Agreement
             To Extend the Time To Assess Tax

     Petitioner seeks abatement of interest related to his 1989

tax year on the grounds that respondent allegedly improperly

levied his Keogh account, and applied the funds levied from his

Keogh account to his 1985 year before posting them to his 1989

year.     We disagree.   Respondent’s levy resulted in collection of

tax, which reduced the amount of interest that would otherwise

have accrued.     No interest accrued because of the levy.

Respondent credited the levied funds to petitioner’s 1985 tax

year on October 13, 1993, but subtracted the levied amount and

credited those funds to petitioner’s 1989 tax year, also on

October 13, 1993.     No additional interest accrued for 1989 as a

result of crediting the levied funds to petitioner’s 1985 tax

year.

     On October 15, 1998, at respondent’s request, petitioner

signed a tax collection waiver for assessments which extended to

December 31, 2000, the time to collect petitioner’s tax

liabilities assessed on December 19, 1988, for tax year 1987, and

on November 19, 1990, for tax year 1989.     However, no additional

interest accrued for 1989 as a result of petitioner’s signing the

tax collection waiver.



     5
      (...continued)
(2) in a subsequent refund case in a refund forum.
                             - 11 -

C.   Conclusion

     For the foregoing reasons, we conclude that respondent’s

denial of petitioner’s claim to abate interest relating to his

1989, 1991, and 1992 tax years was not an abuse of discretion.

     To reflect the foregoing,

                                             Decision will be

                                        entered for respondent.
