                        T.C. Memo. 2010-133


                      UNITED STATES TAX COURT



              KATHLEEN MILLER GEIGER, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 21932-08.              Filed June 16, 2010.



     Kathleen Miller Geiger, pro se.

     Rollin G. Thorley and Paul C. Feinberg, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION1


     GERBER, Judge:   This case stems from respondent’s denial of

petitioner’s request for an abatement of interest under section



     1
      Petitioner filed a petition requesting small tax case
proceedings under sec. 7463(a), I.R.C. Respondent moved for
removal of that designation on the ground that this interest
abatement proceeding fits within none of the categories of cases
that may be conducted under the small tax case provisions. The
Court granted respondent’s motion.
                                 - 2 -

6404(e).2   The issue presented for our consideration is whether

there was abuse of discretion in the denial of petitioner’s

abatement request.

                         FINDINGS OF FACT3

     Petitioner resided in Nevada at the time her petition was

filed.   She filed her 1997 Federal income tax return on June 25,

1998, showing tax due of $574.    Respondent assessed the tax along

with $18.53 of interest on September 7, 1998.    Petitioner, as

part of a divorce proceeding, was entitled to money from her

husband’s retirement account during 1996 and 1997.    Petitioner

reported the withdrawal as alimony for 1996, but ultimately

respondent refunded the tax attributable to that item.    In a

conversation about her 1996 return, one of respondent’s agents

suggested that petitioner file a Form 8606, Nondeductible IRAs

(Contributions, Distributions, and Basis), to reflect

petitioner’s basis in the retirement account to determine the

amount of income reportable, if any, for 1997.    Petitioner filed

an amended return for 1997, including a Form 8606 showing her

basis in the retirement account.    After following the suggestion




     2
      Unless otherwise indicated, all section references are to
the Internal Revenue Code applicable to the period under
consideration.
     3
      The parties’ stipulation of facts and the exhibits are
incorporated by this reference.
                                 - 3 -

of respondent’s agent, petitioner did not hear from respondent

until respondent began an examination of her 1997 return.

     Petitioner’s 1997 tax return as amended was audited, and

respondent, in a June 21, 2000, notice of deficiency, determined

a $14,743 income tax deficiency and a $1,685 accuracy-related

penalty under section 6662(a).    On September 15, 2000, petitioner

filed a petition with this Court (at docket No. 9739-00S) seeking

review of respondent’s determination (deficiency case).

     Petitioner was represented in the deficiency case, and an

agreed decision reflecting a $6,855 income tax deficiency and an

$860 section 6662 accuracy-related penalty was entered on June

29, 2001.    Shortly thereafter, on September 3, 2001, respondent

sent petitioner notification of a $900.424 outstanding balance

due on the $574 tax liability she had originally reported for

1997.    Seven days later, on September 10, 2001, respondent

assessed the agreed income tax deficiency and accuracy-related

penalty from the deficiency case, along with $2,607.47 of accrued

interest and a $143.50 failure to pay penalty.    Since the time of

the assessment of the additional 1997 tax, respondent has applied

over $6,000 of subsequent years’ tax refunds to satisfy portions

of petitioner’s outstanding 1997 liability.




     4
      The $900.42 included additional interest accruals and
penalties for late payment.
                               - 4 -

     On or about May 22, 2002, petitioner filed a Form 843, Claim

for Refund and Request for Abatement, seeking a $2,750 abatement

of interest and claiming that the accumulation of interest was

caused by respondent’s errors and delays.   Petitioner’s request

for an abatement contained the following assertions:   (1) That

petitioner was entitled to interest “netting”; (2) that

respondent erred in not notifying her until June 1999 that there

was a deficiency; (3) that respondent erred with respect to the

September 3 and 10, 2001, letters reflecting different amounts of

tax and/or interest due; and (4) that the tax assessment is

incorrect because petitioner was “misguided” (relied on incorrect

information from respondent) with respect to her filing of a Form

8606 along with her amended 1997 return.

     Petitioner, on July 21, 2003, before respondent issued a

final determination, filed a petition with this Court seeking

review of respondent’s failure to abate interest, but that case

was dismissed for lack of jurisdiction.    From the 2002 filing of

the claim for an abatement until almost 6 years later, petitioner

made numerous inquiries about the status of her claim and

respondent’s agents sent responses seeking additional time to

make their determination.   During that same period, respondent

offset income tax refunds against the 1997 tax liability and

interest.   During the pendency of her claim for abatement,
                              - 5 -

petitioner had no legal course of action to require respondent to

make a determination.5

     On March 7, 2008, respondent issued a final determination

disallowing, in full, petitioner’s request for an interest

abatement regarding her 1997 tax year.   In the final

determination, respondent provided the following reasons for

denying petitioner’s request for an interest abatement:    (1)

Interest netting does not apply in a situation where a taxpayer

does not have a credit available from another tax period; (2) the

1997 income tax deficiency was the result of an agreement between

respondent and petitioner (who was represented), so that

petitioner was not misled by respondent; (3) the September 3 and

10, 2001, letters, from respondent were not in disagreement

because the first letter was issued before the assessment of the

deficiency referenced in the latter one; (4) interest cannot be

abated on the basis of the tax law information provided by

respondent; and (5) petitioner did not make any payments on the

outstanding 1997 tax liability, except for respondent’s offsets

of overpayments from other years.   Petitioner filed a petition

with this Court on September 5, 2008, seeking review of

respondent’s denial of her request for an abatement.




     5
      The law was changed for taxable years ending after July 22,
1998, by the enactment of new sec. 6404(g).
                                - 6 -

       On brief, respondent admitted that petitioner is entitled to

an abatement of 1997 tax year interest “from the date * * * [of

petitioner’s request] (May 22, 2002) through the date of * * *

[respondent’s] final determination denying her request (March 7,

2008).”    In all other respects, respondent continues to stand by

his determination that petitioner is not entitled to an abatement

of 1997 tax year interest.

                               OPINION

       Section 6404(e)(1) provides the Commissioner with authority

to abate the assessment of interest on a deficiency attributable

in whole or in part to any unreasonable error or delay by an

officer or employee of the Internal Revenue Service (acting in

his official capacity) in performing a ministerial or managerial

act.    See also Woodral v. Commissioner, 112 T.C. 19, 24-25

(1999).

       Section 301.6404-2(b)(1) and (2), Proced. & Admin. Regs.,

provides:

       (b) Definitions-–(1) Managerial act.--means 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. A
       decision concerning the proper application of federal
       tax law (or other federal or state law) is not a
       managerial act. Further, a general administrative
       decision, such as the IRS’s decision on how to organize
       the processing of tax returns or its delay in
       implementing an improved computer system, is not a
       managerial act for which interest can be abated under
       paragraph (a) of this section.
                                - 7 -

         (2) Ministerial act.--means a procedural or
      mechanical act that does not involve the exercise of
      judgment or discretion, and that occurs during the
      processing of a taxpayer’s case after all prerequisites
      to the act, such as conferences and review by
      supervisors, have taken place. A decision concerning
      the proper application of federal tax law (or other
      federal or state law) is not a ministerial act.

      This Court may order abatement where the Commissioner abuses

his discretion by failing to abate interest.    Sec. 6404(h)(1).

In order to prevail, a taxpayer must show6 that the Commissioner

exercised his discretion arbitrarily, capriciously, or without

sound basis in fact or law.    Woodral v. Commissioner, supra at

23.

      Respondent now concedes that petitioner is entitled to an

interest abatement for the 1997 tax year from the date of

petitioner’s abatement request (May 22, 2002) through the date of

respondent’s final determination denying her request (March 7,

2008).    We must now consider whether it was an abuse of

discretion for respondent to deny abatement for any portion of

interest not so conceded.    The periods we consider are from the

filing of the return to the request for abatement and from the

denial of the abatement to the time of trial.

      Before the request for abatement, petitioner had filed her

1996 return reporting amounts from her divorced husband’s



      6
      No question has been raised by the parties regarding sec.
7491 and/or whether the burden shifted from petitioner to
respondent in this proceeding.
                                 - 8 -

retirement account as alimony.    In dealing with respondent’s

agents for 1996, she was advised to amend her 1997 return and to

file a Form 8606 in order to show any basis in the retirement

account and thereby reduce the tax.      Petitioner followed that

advice, thereby reporting a reduced 1997 income tax liability.

In June 1999 respondent examined petitioner’s 1997 return, as

amended, and determined a $14,743 income tax deficiency and a

$1,685 accuracy-related penalty.    Petitioner filed a timely

petition with this Court, and during June 2001 her representative

resolved the deficiency dispute by agreeing to a reduced income

tax deficiency and accuracy-related penalty of $6,855 and $860,

respectively.

     Shortly thereafter, the reduced deficiency and penalty were

assessed along with $2,607.47 of accrued interest and a $143.50

failure to pay penalty.   Several months later (around May 22,

2002) petitioner filed her claim for a $2,750 abatement.      In

support of the claim, petitioner contended that respondent had

given her bad tax advice and sent her contradictory statements of

her account and that she was entitled to interest netting.

Petitioner also complained about the amount of the agreed 1997

deficiency, explaining that she had not been made fully aware of
                               - 9 -

what had transpired.7   Respondent concedes that petitioner is

entitled to an abatement of interest for the period during which

her request for an abatement was pending at the administrative

level.

     The period from the filing of petitioner’s 1997 return

through the amended return filing, respondent’s examination, the

issuance of a notice of deficiency, petitioner’s petition to this

Court, and the settlement of that case is well within the normal

range of such activities and does not reflect the existence of an

unreasonable delay or error of any kind.8

     Petitioner also claimed that an incorrect Form 1099-R,

Distributions From Pensions, Annuities, Retirement or Profit-

Sharing Plans, IRAs, Insurance Contracts, etc., had been issued

and that she was given bad advice about the filing of a Form 8606

and the amendment of her 1997 return.   Neither of those

circumstances, however, would give rise to an abatement of

interest under section 6404.   In particular, advice or a decision

involving the proper application of tax law or procedure is



     7
      We note that in the context of this proceeding concerning
our review of respondent’s denial of a request for abatement, we
are without jurisdiction to redetermine the amount of the
deficiency and there has been no showing of a fraud upon the
Court or a motion filed to reopen the deficiency case. See,
e.g., Naftel v. Commissioner, 85 T.C. 527, 530 (1985).
     8
      It is noted that no abatement is available for the period
preceding the time when the Commissioner first contacts a
taxpayer in writing.
                             - 10 -

generally not considered to be a “ministerial or managerial act.”

Sec. 301.6404-2(b)(1) and (2), Proced. & Admin. Regs.; see also

Nelson v. Commissioner, T.C. Memo. 2004-34.

     Although petitioner was sent successive overlapping notices,

they were not contradictory and each reflected the outstanding

tax liability at the time of issuance.   Finally, petitioner has

not shown the appropriate conditions for interest netting; i.e.,

that there were existing credits that would have reduced the

amount of the finally agreed deficiency.    Although respondent

offset overpayments from subsequent years against the agreed 1997

deficiency, that situation does not result in “interest netting”

for the 1997 tax year.

     Finally, events that occurred from the March 7, 2008, denial

of petitioner’s claim for an abatement through the filing of a

petition and the issuance of this opinion do not warrant an

abatement of interest.

     Accordingly, we hold that there was no abuse of discretion

by respondent in denying petitioner’s request for interest

abatement for periods other than that for which respondent has

conceded an abatement.

     To reflect the foregoing,


                                           Decision will be entered

                                   for respondent.
