                        T.C. Memo. 2000-354



                      UNITED STATES TAX COURT



                DONALD B. HAWKSLEY, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 17785-99.                 Filed November 15, 2000.


     Donald B. Hawksley, pro se.

     William F. Castor, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     DAWSON, Judge:   This case was assigned to Special Trial

Judge Robert N. Armen, Jr., pursuant to the provisions of section
                                 - 2 -

7443A(b)(5) and Rules 180, 181, and 183.1     The Court agrees with

and adopts the opinion of the Special Trial Judge, which is set

forth below.

                  OPINION OF THE SPECIAL TRIAL JUDGE

     ARMEN, Special Trial Judge:     On June 2, 1999, respondent

issued a notice of final determination denying petitioner’s claim

for abatement of interest on a deficiency in petitioner’s Federal

income tax for the taxable year 1986.    Petitioner timely filed a

petition with this Court pursuant to section 6404(i) and Rules

280-284.     The issue for decision is whether respondent abused his

discretion by denying petitioner’s claim for abatement of

interest.2    We hold that respondent did not.3

                           FINDINGS OF FACT

     Most of the facts have been stipulated, and are so found.

The stipulation of facts and supplemental stipulation of facts,


         1
         Unless otherwise indicated, 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.
     2
        To the extent that petitioner’s claim for abatement
includes a claim for abatement of tax, penalties, or additions to
tax, see infra Findings of Fact F, it is clear that this Court
lacks jurisdiction to consider such claim. See sec. 6404(b),
(e)(1); Krugman v. Commissioner, 112 T.C. 230, 237 (1999).
     3
        The Court directed respondent to file an opening brief
within 60 days after the conclusion of the trial and afforded
petitioner the opportunity of filing an answering brief within 30
days thereafter. Compare Rule 151(b)(2). Respondent timely
filed an opening brief; however, petitioner chose not to file an
answering brief.
                               - 3 -

together with the exhibits thereto, are incorporated herein by

this reference.

      Petitioner resided in Rogers, Arkansas, at the time that the

petition was filed with the Court.

A.   Examination of Petitioner’s 1985 Return

      On July 14, 1986, petitioner filed his Federal income tax

return, Form 1040, U.S. Individual Income Tax Return, for 1985.

On the return, petitioner listed his address as in Santa Barbara,

California.   Petitioner attached to his return a Schedule C,

Profit or Loss From Business or Profession.    On the Schedule C,

petitioner claimed total   deductions in the amount of $36,145.

      Approximately a year later, on July 10, 1987, respondent

sent a letter to petitioner, notifying him that his 1985 return

had been selected for examination and requesting him to furnish

all documentation used in the preparation of that return.

      On August 7, 1987, petitioner sent respondent a reply

letter, requesting that the examination of his 1985 return be

transferred to respondent’s office in Modesto, California.

Respondent agreed to petitioner’s request, and on October 19,

1987, a revenue agent from the Modesto office sent petitioner a

letter requesting specific documentation pertaining to the

examination of petitioner’s 1985 return.

      On November 20, 1987, Robert C. Davis (Mr. Davis), a

certified public accountant and petitioner’s representative under
                              - 4 -

a power of attorney, Form 2848, Power of Attorney and Declaration

of Representative, provided certain information and documentation

to respondent.

     On December 11, 1987, respondent sent petitioner a 30-day

letter at petitioner’s new address in Romoland, California.4    The

letter proposed changes to petitioner’s 1985 return, including

the complete disallowance of the Schedule C deductions in the

amount of $36,145.

     On January 6, 1988, Mr. Davis sent a reply letter to

respondent’s revenue agent in Modesto, California.   That letter

stated in part as follows:

     I am writing to confirm our telephone conversation of
     December 28, 1987. At that time you stated that you
     were going to disallow all deductions due to the fact
     that the amounts originally claimed could not be
     reconciled to the amounts which were documented upon
     your audit of my client of [sic] 1985 Form 1040.

     I am recommending to my client that we go through the
     normal channels of appeal in this matter. We would
     first request a conference with your supervisor to
     discuss the audit adjustments as you have proposed.

     On January 12, 1988, respondent sent Mr. Davis a letter,

enclosing receipts and canceled checks that petitioner and/or Mr.

Davis had submitted to the revenue agent’s group manager in

Modesto, California, on January 12, 1988.   Presumably, this

     4
        On Dec. 29, 1987, petitioner executed Form 488-A, Change
of Address, reflecting Romoland as his new address. It would
appear that petitioner’s change of address had come to
respondent’s attention before petitioner provided formal
notification.
                                - 5 -

documentation had been submitted during the course of the

conference with the agent’s supervisor.

      On September 14, 1988, respondent sent a notice of

deficiency to petitioner at petitioner’s last known address in

Romoland, California.    In the notice, respondent determined a

deficiency in petitioner’s income tax for 1985 in the amount of

$9,423.   The deficiency was attributable in large part to the

complete disallowance of petitioner’s Schedule C deductions in

the amount of $36,145.    In the notice, respondent also determined

additions to tax for negligence under section 6653(a)(1) and (2)

and for substantial understatement of liability under section

6661.

      Petitioner received the notice of deficiency for 1985.

However, petitioner did not file a petition with this Court

contesting respondent’s deficiency determinations.    Accordingly,

on March 20, 1989, respondent assessed the deficiency in income

tax ($9,423) and the additions to tax as determined in the

notice.

B.   Examination of Petitioner’s 1986 Return

      On July 13, 1987, petitioner filed his Federal income tax

return (Form 1040) for 1986.    On the return, petitioner listed

his address as in Santa Barbara, California.    Petitioner attached

to his return a Schedule C, Profit or Loss From Business or

Profession.   On the Schedule C, petitioner claimed total
                              - 6 -

deductions in the amount of $23,791.   Petitioner also attached to

his return a Schedule E, Supplemental Income and Loss.    On the

Schedule E, petitioner claimed net losses from two limited

partnerships in the aggregate amount of $47,304, as follows:


          Partnership                  Loss Claimed
          Barrington Park                $26,710
          Southmark/Envicon               20,594
                                         $47,304


     On April 24, 1989, respondent sent a letter to petitioner in

Romoland, California, notifying him that his 1986 return had been

selected for examination and requesting that he contact the

Modesto, California office in order to schedule an appointment.

     From June to October 1989, respondent was contacted on

various occasions by Ralph “R.A.” Amigron (Mr. Amigron), who

claimed to be a certified public accountant and petitioner’s

representative under a power of attorney.5    However, respondent

did not have on file any power of attorney from petitioner naming

Mr. Amigron as petitioner’s representative.    Accordingly,

respondent did not recognize Mr. Amigron as petitioner’s

representative; rather, respondent undertook to send all

correspondence directly to, and deal directly with, petitioner.

     Having learned that petitioner may have moved from Romoland,

     5
        At some point in time before June 1989,   petitioner had
hired Mr. Amigron as a sales representative for   the company for
which petitioner worked as a manager. Sometime    thereafter,
petitioner engaged Mr. Amigron to represent him   before the IRS.
                               - 7 -

California, respondent submitted a Request to Locate Person (PS

Form 3241) to the U.S. Postal Service on August 8, 1989.    Later

that month, on August 18, 1989, respondent received a response

from the Postal Service indicating that petitioner’s address was

in Hemet, California.   On that same day, respondent sent a 30-day

letter to petitioner in Hemet, proposing changes to petitioner’s

1986 return.   The record suggests that this letter may not have

been received by petitioner.

     On September 12, 1989, respondent sent a copy of the 30-day

letter to petitioner by certified mail, return receipt requested,

at an address in Clermont, Florida.6   The Postal Service Return

Receipt (PS Form 3811) reveals that the letter was received on

September 15, 1989, by an agent of the addressee.

     In October 1989, respondent received a power of attorney

(Form 2848) from Mr. Amigron naming him as petitioner’s

representative.   However, the signature on the power of attorney

purporting to be that of petitioner did not match petitioner’s

signature on other documents in respondent’s possession.

Accordingly, respondent’s Examination Division referred Mr.

Amigron to respondent’s Inspection Division.   Respondent

continued to send all correspondence directly to petitioner.

     On October 31, 1989, respondent sent a “final notice”


     6
        Prior to Sept. 12, 1989, Mr. Amigron had advised
respondent that petitioner was living in Florida.
                               - 8 -

version of the 30-day letter for 1986 to petitioner by certified

mail at the address in Clermont, Florida.

      On March 19, 1990, respondent sent a notice of deficiency to

petitioner at petitioner’s last known address in Clermont,

Florida.   In the notice, respondent determined a deficiency in

petitioner’s income tax for 1986 in the amount of $47,294.     The

deficiency was attributable in large part to three adjustments:

(1) The disallowance of petitioner’s Schedule C deductions in the

amount of $23,791; (2) the disallowance of petitioner’s Schedule

E partnership losses in the amount of $47,304; and (3) unreported

gain from the sale of shares in United Funds, Inc. in the amount

of $29,958.7   In the notice, respondent also determined additions

to tax for negligence under section 6653(a)(1)(A) and (B) and for

substantial understatement of liability under section 6661.

      Petitioner received the notice of deficiency for 1986.

However, petitioner did not file a petition with this Court

contesting respondent’s deficiency determinations.   Accordingly,

on August 20, 1990, respondent assessed the deficiency in income

tax ($47,294) and the additions to tax against petitioner.

C.   Mr. Amigron’s Arrest

      On May 3, 1991, Mr. Amigron was arrested in California by

inspectors of respondent’s Internal Security Division in

      7
        Respondent determined the amount of gain based, in part,
on petitioner’s failure to demonstrate any basis in the shares.
See secs. 1001, 1011(a).
                               - 9 -

connection with a 4-count felony indictment handed down by a

Federal grand jury.   The indictment alleged that Mr. Amigron, a

former IRS revenue officer, falsely claimed to be a certified

public accountant, and an enrolled actuary, and that he knowingly

used false Social Security numbers on tax documents.8

D.   Petitioner’s Amended Returns for 1985 and 1986

      On September 15, 1995, more than 6 years after respondent

had assessed the deficiency and additions to tax for 1985 and

nearly 5 years after respondent had assessed the deficiency and

additions to tax for 1986, respondent’s Problem Resolution Office

in Little Rock, Arkansas, sent petitioner a letter enclosing a

copy of the notice of deficiency for 1986.

      One week later, on September 22, 1995, petitioner executed

Form 2848, Power of Attorney and Declaration of Representative,

naming John H. Peterson (Mr. Peterson), an attorney, and Robert

M. Magness (Mr. Magness), a certified public accountant, as his

representatives with respect to his Federal income tax

liabilities for 1985, 1986, and 1993.

      On November 6, 1995, Mr. Peterson sent a letter to

respondent enclosing an amended income tax return (Form 1040X)

for 1985 for petitioner.   The amended return, which was signed on

behalf of petitioner by Mr. Magness, reduced taxable income (as


      8
        The record does not disclose the disposition of the
indictment.
                                 - 10 -

determined by respondent in the notice of deficiency for 1985) by

$29,037.   The amended return explained this reduction as follows:

           To reinstate previously disallowed [Schedule
           C] expenses as follows:

           Disallowed on audit     $36,145
           Supplies                 (7,108)

           Reinstated              $29,037

     Mr. Magness also executed, on petitioner’s behalf, an

amended income tax return (Form 1040X) for 1986, which was

submitted to respondent on January 12, 1996.   Among other

matters, the amended return “reinstated” the previously

disallowed Schedule C expenses in the amount of $23,791 and the

previously disallowed Barrington Park limited partnership loss in

the amount of $26,710.   In addition, the amended return reported

a basis by gift in the amount of $21,365 in the shares of United

Funds, Inc.

     Also, on or about January 12, 1996, petitioner submitted to

respondent an unsigned and undated copy of a gift tax return,

Form 709, United States Gift (and Generation Skipping Transfer)

Tax Return, for 1985 for Maxine Hawksley, donor.9   The gift tax

return disclosed, inter alia, a gift of “mutual funds” to “Donald

B. Hawksley” of Gainesville, Missouri, in February 1985.     The

gift tax return also disclosed that the donor’s adjusted basis in


     9
        Presumably, petitioner and Maxine Hawksley are related,
but the record does not disclose the nature of the relationship.
                                - 11 -

the gift was $21,365, and that the value of the gift at the date

of transfer was also $21,365.

     Later that month, on January 22, 1996, petitioner submitted

a Federal income tax return (Form 1040) for 1993, which was

executed by Mr. Magness on petitioner’s behalf.    The return

reflected a loss from the sale of petitioner’s interests in the

Barrington Park and Southmark/Envicon limited partnerships that

respondent had disallowed for 1986.

     On February 27, 1996, respondent’s Problem Resolution Office

sent Mr. Peterson a letter regarding petitioner’s amended income

tax returns for 1985 and 1986.    The letter included an

itemization of the documents and information that were needed in

order to process the amended returns.    The letter also stated, in

part, as follows:

     The over-riding problem throughout the examination
     report centers around Mr. Hawksley’s failure to keep
     any kind of contemporaneous record of his business
     expenses.

     Another problem is that Mr. Hawksley’s employer
     provided a copy of a reimbursement policy, which
     indicated he could have been reimbursed for certain
     travel, entertainment, and moving expenses, had he
     applied for same in advance.

     The examiner’s conclusion * * * that all of Mr.
     Hawksley’s documentation lost validity and confidence
     was based on a two-fold observation: 1) The
     documentation provided during the course of the
     examination was apparently not what was used to prepare
     the original return, as there were large discrepancies
     between amounts presented to our examiner and those
     reported on the return; AND 2) Taxpayer’s inability to
     provide substantiation for one entire expense item--
                              - 12 -

     Supplies - $7,108.

Nevertheless, the letter concluded by stating that for 1986,

respondent was prepared to allow the previously disallowed

Schedule E Barrington Park partnership loss ($26,710) and the

gift tax basis in the shares of United Funds, Inc. ($21,365);

however, the letter emphasized that “without proper documentation

of the above Schedule C expenses, we will be unable to reconsider

that portion of our initial examination findings.”

     On March 13, 1996, respondent’s Problem Resolution Office

sent Mr. Peterson a letter stating that “we haven’t heard from

you yet.”

     After a response from Mr. Magness on March 20, 1996,

requesting, inter alia, additional time to provide the previously

requested information and documentation, respondent’s Problem

Resolution Office agreed to extend the time to April 22, 1996.

However, Mr. Magness was advised that if such information and

documentation were not received by that time, respondent would

allow only the Schedule E Barrington Park partnership loss and

the gift tax basis in the shares of United Funds, Inc., and no

allowance would be made for disallowed Schedule C expenses for

either 1985 or 1986.

     The requested information and documentation was apparently

not received.   Accordingly, on May 27, 1996, respondent abated

only $23,785.64 of the original $47,294 assessment of the income
                              - 13 -

tax deficiency for 1986.   The $23,785.64 abatement for 1986

represented the income tax attributable to respondent’s allowance

of the previously disallowed Schedule E Barrington Park

partnership loss of $26,710 and the gift tax basis in the shares

of United Funds, Inc. of $21,365.

E. Additional Abatements Related to a Problem Solving Day in
1998

     On April 22, 1998, petitioner attended one of respondent’s

Problem Solving Days and provided documentation substantiating

$20,222, or 85 percent, of the total deductions ($23,791) claimed

by petitioner on his Schedule C for 1986.   Respondent then

extrapolated from this substantiation and allowed petitioner

$30,723, or 85 percent, of the total deductions ($36,145) claimed

by petitioner on his Schedule C for 1985.

     On May 11, 1998, and as a consequence of the foregoing

allowance, respondent abated $8,525 of the original income tax

deficiency assessment of $9,423 for 1985 and fully abated the

assessed additions to tax under sections 6653(a)(1) and (2) and

6661 for that year.   The $8,525 abatement represented the tax

attributable to the allowance of $30,723 in Schedule C deductions

for 1985.   This abatement resulted in a net assessed deficiency

in income tax of $898 for 1985.

     Also on May 11, 1998, and again as a consequence of the

allowance made on the Problem Solving Day, respondent abated

$9,453.66 of the original income tax deficiency assessment of
                                   - 14 -

$47,294 for 1986 and fully abated the assessed addition to tax

under section 6661 for that year.        The $9,453.66 abatement

represented the tax attributable to the allowance of $20,222 in

Schedule C deductions for 1986.        This abatement, together with

the $23,785.64 abatement made on May 27, 1996, described supra in

D, resulted in a net assessed deficiency in income tax of

$14,054.70 for 1986, as well as additions to tax under section

6653(a)(1)(A) and (B) for that year.10

        Additionally on May 11, 1998, respondent issued petitioner a

notice reflecting the above-described abatement of income tax and

additions to tax for 1985, as well as an abatement of interest

and late payment penalty.        The notice also indicated that the

amount to be refunded for 1985 was $17,866.18.11

     Finally on May 11, 1998, respondent issued petitioner a

notice reflecting the application of $6,166.80 of the $17,866.18

overpayment for 1985 to petitioner’s outstanding liability for

1986.        One week later, on May 18, 1998, respondent issued

petitioner another notice reflecting the application of $5,891.62

of the remaining overpayment for 1985 to petitioner’s outstanding

liability for 1986.




        10
        The net assessed addition to tax under sec.
6653(a)(1)(A) was $703.
        11
        Petitioner had been making payments for a number of
years against his assessed liability for 1985.
                              - 15 -

F.   Petitioner’s Claim for Abatement

      On August 24, 1998, respondent issued petitioner a notice

indicating that the balance due on his income tax liability for

1986 was $24,989.86.   Of this amount, $24,230.89 pertained to

interest and the balance to one or more penalties.

      On February 5, 1999, petitioner filed a claim for abatement

of interest and penalties for 1986.

      On April 7, 1999, respondent sent petitioner a letter

stating that respondent could not allow petitioner’s claim for

abatement of interest and penalties.    Thereafter, on June 2,

1999, respondent’s Appeals Office sent petitioner a Notice of

Final Determination formally disallowing petitioner’s claim for

abatement.   The notice stated, in part, as follows:

      Although delays occurred from the date of the initial
      contact letter * * * until 5/11/98 when the second tax
      abatement was granted, the delay was not caused by a
      Service employee. The delay appears to have been
      caused when you relied on an unauthorized
      representative to represent you on the examination of
      your 1986 tax return. When no protest was received in
      response to the audit report mailed to you on 10/31/89
      the case was forwarded for issuance of the statutory
      notice of deficiency. The statutory notice of
      deficiency was issued 3/19/90 and when you did not file
      a petition with Tax Court within the 90-day period, the
      tax assessment was made 8/20/90.

      Subsequent to this, you provided information to warrant
      a $23,785.64 tax abatement on 5/27/96 and furnished
      additional information to justify another tax abatement
      in the amount of $9,453.66 on 5/11/98.

      The information was not provided to the examiner prior
      to issuance of the statutory notice of deficiency.
      Once the information was provided in 1996 and 1998, it
                                - 16 -

      was considered and the allowable amount was determined.
      This delay was not caused by a Service employee’s
      failure to perform a ministerial act.

      On November 26, 1999, petitioner filed a petition with this

Court for review of respondent’s failure to abate interest under

section 6404.    See Rule 281(a).   The petition disputes the sum of

$24,989.86 and alleges, in part, that “The interest calculation

is due in part to tax [deficiencies] assessed in error.”12

G.   Recomputation of Petitioner’s Liability for Interest

      Sometime after respondent had formally disallowed

petitioner’s claim for abatement and petitioner had filed his

petition with this Court, respondent realized that petitioner’s

account for 1986 had been credited with only a portion of

petitioner’s overpayment for 1985; i.e., only

$12,058.42 (i.e., $6,166.80 + $5,891.62) of the $17,866.18

overpayment for 1985 had been credited against petitioner’s

liability for 1986.    See supra E.   Respondent corrected this

error.     As a result, petitioner’s liability for interest for 1986

was reduced significantly.    As of May 31, 2000, petitioner’s

liability for interest for 1986 was $12,155.57, or approximately

one-half of the amount shown on the notice issued by respondent

on August 24, 1998.    See supra F.




      12
        See supra note 2 regarding our lack of jurisdiction to
consider any claim for abatement of tax, penalty, or addition to
tax.
                              - 17 -

H.   Petitioner’s Allegations Regarding “The Box”

      The record in this case includes a copy of a mailing label

affixed to a box.   The mailing label identifies petitioner as the

addressee and respondent’s office in Little Rock, Arkansas, as

the sender.   The mailing label is franked, so that no postmark

appears on it.

      Petitioner alleges that he received the box in the mail at

or about the end of 1993 and that it contained some, but not all,

of his tax records.   In this regard, petitioner alleges that when

respondent arrested Mr. Amigron in May 1991, see supra C,

respondent also seized petitioner’s tax records, which were in

Mr. Amigron’s possession, but that respondent subsequently lost

some of those records.   Petitioner also alleges that when he

received the box, “There was a letter inside signed by some lady”

explaining how the records had come into respondent’s possession.

In responding to the Court’s invitation to produce the letter,

petitioner testified that he did not have it.

                              OPINION

      In general, interest on a deficiency in income tax begins to

accrue on the due date of the return for such tax and continues

to accrue, compounding daily, until payment is made.   See secs.

6601(a), 6622(a).

      This Court may order an abatement of interest only if there

is an abuse of discretion by the Commissioner in failing to abate
                               - 18 -

interest.   See sec. 6404(i), formerly sec. 6404(g).   In order to

demonstrate an abuse of discretion, a taxpayer must prove that

the Commissioner exercised his discretion arbitrarily,

capriciously, or without sound basis in fact or law.    See Rule

142(a); Lee v. Commissioner, 113 T.C. 145, 149 (1999); Woodral v.

Commissioner, 112 T.C. 19, 23 (1999).13

     The Commissioner has authority to abate, in whole or in

part, an assessment of interest on a deficiency if the accrual of

such interest is attributable to an error or delay by an officer

or employee of the Internal Revenue Service, acting in his or her

official capacity, in performing a ministerial act.    See sec.

6404(e)(1).14   An error or delay by the Commissioner can be taken

into account only (1) If it occurs after the Commissioner has

contacted the taxpayer in writing with respect to the deficiency



     13
        Sec. 7491(a) serves to shift the burden of proof if,
inter alia, the taxpayer introduces credible evidence with
respect to any factual issue relevant to ascertaining the
liability of the taxpayer for any tax imposed by subtitle A or B.
In general, interest is treated as tax. See sec. 6601(e)(1).
However, interest on an underpayment of tax is imposed by sec.
6601, which is part of subtitle F. Accordingly, sec. 7491(a)
does not apply to the present case.
     14
        Sec. 6404(e) was amended in 1996 by the Taxpayer Bill of
Rights 2, Pub. L. 104-168, sec. 301, 110 Stat. 1452, 1457 (1996),
to permit the Commissioner to abate interest with respect to an
“unreasonable” error or delay resulting from “managerial” or
ministerial acts. The amendment applies to interest accruing
with respect to deficiencies for taxable years beginning after
July 30, 1996; accordingly, the amendment is inapplicable to the
present case. See Woodral v. Commissioner, 112 T.C. 19, 25 n.8
(1999).
                                - 19 -

and (2) if no significant aspect of the error or delay is

attributable to the taxpayer.    See sec. 6404(e)(1); Krugman v.

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

T.C. Memo. 1999-376.   Section 6404(e)(1) “does not therefore

permit the abatement of interest for the period of time between

the date the taxpayer files a return and the date the IRS

commences an audit, regardless of the length of that time

period.”   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.

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

routinely; accordingly, we order abatement only “where failure to

abate interest would be widely perceived as grossly unfair.”       Lee

v. Commissioner, 113 T.C. 145, 149 (1999); H. Rept. 99-426,

supra; S. Rept. 99-313, supra.

     Petitioner contends that interest should be abated because:

(1) Respondent erroneously determined petitioner’s income tax

liabilities for 1985 and 1986; (2) respondent seized petitioner’s

records in May 1991 when Mr. Amigron was arrested and then lost

some of those records, thereby depriving petitioner of the

opportunity of defending himself against respondent’s deficiency

determinations; and (3) respondent failed to apply all of

petitioner’s overpayment for 1985 against petitioner’s liability

for 1986, thereby overstating interest for 1986 and depriving

petitioner of the opportunity of immediately paying such interest
                               - 20 -

in full.15

     In order for petitioner to prevail, there must be an error

or delay in performing a ministerial act that is attributable to

respondent.16   A “ministerial act” does not involve the exercise

of judgment or discretion.   Sec. 301.6404-2T(b)(1), Temporary

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

Rather, a ministerial act means a procedural or mechanical act

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.   See id.   Examples of ministerial

acts are provided in the regulations.   See sec. 301.6404-

2T(b)(2), Temporary Proced. & Admin. Regs., 52 Fed. Reg. 30163

(Aug. 13, 1987).   In contrast, a decision concerning the proper

application of Federal tax law, or other applicable Federal or


     15
        Sec. 6404(e) requires not only that a taxpayer identify
an error or delay caused by a ministerial act on the
Commissioner’s part, but also identify a specific period of time
over which interest should be abated as a result of such error or
delay. See Donovan v. Commissioner, T.C. Memo. 2000-220. In the
present case, petitioner has not focused on this correlation
between the error or delay attributable to a ministerial act on
respondent’s part and a specific period of time; rather,
petitioner is essentially requesting that all interest with
respect to the deficiency in income tax for 1986 be abated. In
effect, petitioner is requesting an exemption from interest,
rather than an abatement of interest. However, the scope of such
request is beyond that contemplated by the statute. See id.
     16
        Further, an abatement of interest “only applies to the
period of time attributable to the failure to perform the
ministerial act.” 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; see supra note 15.
                              - 21 -

State law, is not a ministerial act.     See sec. 301.6404-2T(b)(1),

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

1987).   The mere passage of time does not establish error or

delay in performing a ministerial act.    See Cosgriff v.

Commissioner, T.C. Memo. 2000-241, (citing Lee v. Commissioner,

supra at 150).

     For purposes of section 6404(e), an error or delay cannot be

considered for the period before April 24, 1989, because that is

the date on which respondent first contacted petitioner in

writing regarding the deficiency for 1986.    See sec. 6404(e)(1);

Krugman v. Commissioner, supra; Nerad v. Commissioner, supra.

     We turn now to petitioner’s three contentions regarding why

interest should be abated.

A. Petitioner’s First Contention

     First, petitioner contends that respondent erroneously

determined petitioner’s income tax liabilities for 1985 and 1986.

However, regardless of whether respondent correctly or

incorrectly determined petitioner’s income tax liabilities for

those years, it is clear that a decision concerning the proper

application of Federal tax law, or other Federal or State law, is

not a ministerial act.   See sec. 301.6404-2T(b)(1), Temporary

Proced. & Admin. Regs., supra; Cosgriff v. Commissioner, supra.

Petitioner’s first contention is therefore without merit.
                               - 22 -

B. Petitioner’s Second Contention

     Second, petitioner contends that respondent seized

petitioner’s tax records when Mr. Amigron was arrested and then

lost some of those records, thereby depriving petitioner of the

opportunity of defending himself against respondent’s deficiency

determinations.

     The evidentiary record does not conclusively establish that

petitioner’s tax records were seized when Mr. Amigron was

arrested.   However, respondent does not contest the allegation,

and the evidentiary record does establish that respondent mailed

a box to petitioner, which box (petitioner alleges) contained his

tax records.   We shall therefore proceed on the basis that

petitioner’s tax records were seized when Mr. Amigron was

arrested in May 1991.

     We do not regard the seizure of records in conjunction with

an arrest pursuant to a grand jury felony indictment to be a

ministerial act within the meaning of section 301.6404-2T(b)(1),

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

1987).   See Taylor v. Commissioner, 113 T.C. 206 (1999).

Petitioner does not appear to contend to the contrary; rather, he

alleges that respondent’s agents who executed the arrest warrant

failed to inventory what was seized and “they did not give me

notice on that.”   However, these allegations are unsupported in

the record.    Thus, there is no evidence, other than petitioner’s
                              - 23 -

naked allegation, that an inventory was not taken.   See Tokarski

v. Commissioner, 87 T.C. 74, 77 (1986) (the Court is not required

to accept the self-serving and unsupported testimony of a

taxpayer as gospel).   Further, although petitioner might not have

received “notice on that”, there is no evidence that such notice

was not provided.

     The true crux of petitioner’s contention is that respondent

lost part of his tax records and returned only the balance.

     To date, the Court has not had occasion to decide whether

the loss of a taxpayer’s records is a ministerial act within the

meaning of section 301.6404-2T(b)(1), Temporary Proced. & Admin.

Regs., 52 Fed. Reg. 30163 (Aug. 13, 1987).17   However, we need

not decide this legal issue for two reasons:   First, because the

factual predicate for petitioner’s contention has not been

established; and second, because a significant aspect of any

error or delay by respondent is attributable to petitioner.

     First, petitioner claims that respondent lost part of his

tax records.   However, petitioner was unable to describe exactly



     17
        We note that the final regulations under section 6404
define a managerial act as “an administrative act that occurs
during the processing of a taxpayer’s case involving the
temporary or permanent loss of records or the exercise of
judgment or discretion relating to management of personnel.” See
sec. 301.6404-2(b)(1), Proced. & Admin. Regs.; see also H. Rept.
104-506, at 27 (1996), 1996-3 C.B. 49, 75. We note further that
sec. 301.6404-2(b)(1), Proced. & Admin. Regs., is generally
applicable only to interest accruing with respect to deficiencies
for taxable years beginning after July 30, 1996.
                              - 24 -

what records were allegedly lost.   Rather, petitioner syllogizes

as follows:   He faithfully maintained complete and accurate

records that substantiated every dollar of deduction claimed on

his income tax returns; when he attended the Problem Solving Day

in April 1998, his records substantiated only 85 percent of the

total deductions claimed on his Schedule C for 1986; therefore,

respondent must have lost the records that would have

substantiated the remaining 15 percent of those deductions.

     Petitioner’s syllogism is, of course, self-serving.     See

Tokarski v. Commissioner, supra; cf. Seaboard Commercial Corp. v.

Commissioner, 28 T.C. 1034, 1051 (1957) (a taxpayer's income tax

return is a self-serving declaration that may not be accepted as

proof for the deduction or exclusion claimed by the taxpayer);

Halle v. Commissioner, 7 T.C. 245 (1946) (same), affd. 175 F.2d

500 (2d Cir. 1949).   Moreover, the primary premise of the

syllogism; i.e., that petitioner maintained impeccable records,

is suspect, as demonstrated by the following:

     In January 1988, during the course of the examination of

petitioner’s 1985 income tax return, Mr. Davis, petitioner’s

certified public accountant and representative, described a

telephone conversation with respondent’s revenue agent in which

the agent was said to state that he was “going to disallow all

deductions due to the fact that the amounts originally claimed

could not be reconciled to the amounts which were documented upon
                                - 25 -

[his] audit of my client of [sic] 1985 Form 1040.”    Later that

month, Mr. Davis and/or petitioner attended a conference with the

revenue agent’s group manager and supplied receipts and canceled

checks.   However, such documentation was insufficient to avoid

the issuance of a notice of deficiency in September 1988, which

notice disallowed all of petitioner’s Schedule C deductions.

Petitioner received the notice but, significantly, did not file a

petition with this Court.   If petitioner maintained complete and

accurate records, we fail to understand why he was unable, even

with the help of a certified public accountant, to avoid the

total disallowance of his Schedule C deductions for 1985, and

further, why he would not have filed a petition with this Court

contesting that disallowance.

     Second, an error or delay by the Commissioner can be taken

into account only if no significant aspect of the error or delay

is attributable to the taxpayer.    See sec. 6404(e)(1).   In the

present case, we think that a significant aspect of any error or

delay by respondent is attributable to petitioner, as

demonstrated by the following:

     Respondent never recognized Mr. Amigron as petitioner’s

representative; rather, respondent undertook to send all

correspondence directly to petitioner.    Presumably, petitioner

received the 30-day letter for 1986 that was mailed to him in

September 1989 at his address in Florida and the “final notice”
                               - 26 -

30-day letter for 1986 that was mailed to him in October 1989;

regardless, petitioner received the notice of deficiency for 1986

that was mailed to him in March 1990.   Yet petitioner did

nothing.    He did not protest the 30-day letter; he did not file a

petition with this Court; he did not even contact Mr. Amigron to

inquire what his supposed representative was doing on his behalf

or what his supposed representative recommended be done.

     It should be recalled that Mr. Amigron was not arrested

until May 1991.   Thus, if petitioner had protested the 30-day

letter in September or October 1989 or had filed a petition with

this Court in March 1990, petitioner would have had the

opportunity of substantiating his return with what he alleges

were impeccably maintained records.

     Further, although petitioner testified that respondent

returned his records to him at or about the end of 1993,

petitioner did not file an amended return for 1986 until January

1996, some 2 years later.   Even then, after respondent’s Problem

Resolution Office demonstrated a willingness to abate

petitioner’s 1986 income tax, petitioner failed to produce

documentation for his Schedule C deductions.   Indeed, it was not

until April 1998, yet another 2 years later, that petitioner

finally produced such documentation, which respondent promptly

accepted.

     In view of the foregoing, we conclude that petitioner’s
                              - 27 -

second contention is without merit.

C.   Petitioner’s Third Contention

     Finally, petitioner contends that respondent failed to apply

all of petitioner’s overpayment for 1985 against petitioner’s

liability for 1986, thereby overstating interest for 1986 and

depriving petitioner of the opportunity of immediately paying

such interest in full.

     Respondent acknowledges that the notice sent to petitioner

on August 24, 1998, erroneously overstated the amount of interest

due for 1986.   Respondent also acknowledges that “Respondent has,

in certain cases, abated interest during the time period between

an improper notice and a subsequent corrected notice, consistent

with Example (11) of Treas. Reg. § 301.6404-2(c).”18   See also

Krugman v. Commissioner, 112 T.C. at 240, regarding the



     18
        Sec. 301.6402-2(c), Example 11, Proced. & Admin. Regs.,
provides as follows:

          A taxpayer contacts an IRS employee and requests
     information with respect to the amount due to satisfy
     the taxpayer’s income tax liability for a particular
     taxable year. Because the employee fails to access the
     most recent data, the employee gives the taxpayer an
     incorrect amount due. As a result, the taxpayer pays
     less than the amount required to satisfy the tax
     liability. Accessing the most recent data is a
     ministerial act. The Commissioner may (in the
     Commissioner’s discretion) abate interest attributable
     to any unreasonable error or delay arising from giving
     the taxpayer an incorrect amount due to satisfy the
     taxpayer’s income tax liability. [Emphasis added.]
                              - 28 -

Commissioner’s concession in respect of a notice that failed to

include interest.   Indeed, in Douponce v. Commissioner, T.C.

Memo. 1999-398, the Court held that the Commissioner’s failure to

include accrued but unassessed interest in a payout figure given

to the taxpayer constituted a ministerial act that justified the

abatement of interest.

     Douponce v. Commissioner, supra, is distinguishable from the

present case.   Thus, critical to the Court’s holding in Douponce

was the fact that the taxpayer had inquired regarding the “total

amount due” and after having been given a payoff figure, promptly

paid such amount.   Some 5 months later, when the taxpayer was

notified of his liability for interest, the taxpayer promptly

paid that amount, too.   In holding that the Commissioner should

have abated interest for this 5-month period, the Court stated

that “It is reasonable to assume the only reason for the delay

* * * was caused by respondent’s failure to tell petitioner the

correct amounts due when petitioner requested that information”.

Douponce v. Commissioner, supra.

     In sharp contrast with the facts in Douponce v.

Commissioner, supra, respondent in the present case overstated

the amount of interest due for 1986.   Thus, the assumption made

by the Court in Douponce regarding “the only reason for the

delay” would not seem to be warranted in the present case.

     At trial, petitioner professed to rely on the August 1998
                                 - 29 -

notice erroneously overstating the amount of interest due for

1986.     In this regard, petitioner testified that “had they had

the right figures, I could have settled it back then”.       However,

we are unable to accept this assertion at face value.       See

Tokarski v. Commissioner, 87 T.C. 74 (1986).      Petitioner did not

establish that he had the financial resources in August 1998 to

completely satisfy his tax liability at that time.       Moreover,

petitioner did not even make a substantial payment toward his tax

liability at that time in order to minimize the further accrual

of interest.      Further, once respondent corrected the error and

recomputed petitioner’s liability for interest, petitioner did

not pay off such liability.

        In view of the foregoing, we conclude that petitioner’s

third contention is without merit.

D.   Conclusion

        Consistent with our analysis, we hold that respondent’s

denial of petitioner’s claim for abatement of interest was not an

abuse of discretion.

        In order to give effect to our holding,



                                            Decision will be entered

                                       for respondent.
