                        T.C. Memo. 2004-122



                      UNITED STATES TAX COURT



                ROBERT JAMES JAFFE, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11818-02.            Filed May 19, 2004.


     Robert James Jaffe, pro se.

     Jonathan H. Sloat, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     GOEKE, Judge:   Respondent denied in part petitioner’s

request under section 64041 for abatement of interest on his

Federal income tax deficiencies for 1983 and 1984.   The issue for



     1
       Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect at the time the petition was
filed, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
                                - 2 -

decision is whether respondent’s denial was an abuse of

discretion.    Because we decide that (1) respondent was not

required to notify petitioner of a TEFRA audit, (2) respondent is

not required to offer petitioner a consistent settlement, and (3)

respondent did not err or delay in performing a ministerial act,

we hold that it was not an abuse of discretion.

                          FINDINGS OF FACT

     Some of the facts are stipulated.      The stipulation of facts

and the attached exhibits are incorporated herein by this

reference.    At the time the petition was filed, petitioner

resided in Woodland Hills, California.

     On his 1983 Federal income tax return, petitioner reported a

loss of $14,056, attributable to his investment in a partnership

called Asher & Associates (Asher).      On his 1984 Federal income

tax return, petitioner reported a loss of $757 on Schedule E,

Supplemental Income and Loss, attributable to Asher.      Asher was a

limited partner in Wilshire West Associates (Wilshire), one of 50

coal tax shelter partnerships or joint ventures (Swanton

programs) created by Norman Swanton (Mr. Swanton).2     In 1972, Mr.




     2
       Wilshire and 18 other Swanton partnerships were formed
after the enactment of the Tax Equity and Fiscal Responsibility
Act of 1982 (TEFRA), Pub. L. 97-248, secs. 402-407(a), 96 Stat.
648, and are subject to the partnership rules of TEFRA. The
remaining 30 Swanton partnerships were formed before the
enactment of TEFRA.
                               - 3 -

Swanton cofounded the Swanton Corp., a Delaware corporation

headquartered in New York, which promoted the Swanton programs.3

     On July 14, 1986, respondent issued a notice of beginning of

administrative proceeding (NBAP) to Asher with respect to

respondent’s examination of Wilshire under the audit procedures

of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA),

Pub. L. 97-248, secs. 402-407(a), 96 Stat. 648.   As a result of

respondent’s examination of the Swanton programs, respondent

recommended that the Department of Justice (DOJ) criminally

prosecute Mr. Swanton.   During the criminal investigation,

respondent suspended civil activity with respect to the Swanton

programs.   Eventually, the period of limitations for criminal

prosecution of Mr. Swanton expired.4

     On June 29, 1990, petitioner’s income tax returns were

identified by respondent and placed in “suspense” mode, pending

the outcome of the Swanton program litigation.    This was done in

accordance with Internal Revenue Service (IRS) procedures

regarding taxpayers involved with a TEFRA partnership under

examination.   On August 14, 1990, respondent issued Wilshire a


     3
       For a more detailed discussion of the Swanton programs,
see Kelley v. Commissioner, T.C. Memo. 1993-495.
     4
       Respondent’s records of the Swanton programs were
destroyed in the terrorist attack on the World Trade Center on
Sept. 11, 2001. We have accepted the uncontradicted testimony
from an Internal Revenue Service (IRS) attorney who worked on the
cases regarding certain details of the events surrounding the
litigation and settlement of the Swanton programs.
                                 - 4 -

notice of final partnership administrative adjustment (FPAA) with

respect to its 1983 and 1984 years.      On September 4, 1990,

respondent issued an FPAA to Asher with respect to each of

Wilshire’s 1983 and 1984 years.    On October 26, 1990, Wilshire

filed a petition with this Court with respect to its FPAA.

     In May 1991, Moira Sullivan (Ms. Sullivan), an IRS attorney,

was assigned to work on the Swanton programs.      In September 1991,

Ms. Sullivan and counsel representing the TEFRA Swanton programs

reached a basis of settlement.    Negotiations regarding the terms

of this settlement continued until September 1993.      The final

terms of settlement allowed the investors to deduct half their

cash investments, and subjected them to increased interest under

section 6621(c).    In addition, the settlement required the

consent of all the Wilshire investors.      One Wilshire investor

refused to consent to the settlement, and, eventually, separate

closing agreements were prepared for each Wilshire partner.

     Trials for the pre-TEFRA Swanton programs began in the Tax

Court in 1989 and were completed in late 1992.      Smith v.

Commissioner, 92 T.C. 1349 (1989); Kelley v. Commissioner, T.C.

Memo. 1993-495.    Respondent filed his final brief in the pre-

TEFRA Tax Court litigation on August 14, 1992.5     Respondent



     5
       The Tax Court docket entry sheet for Kelley v.
Commissioner, supra, docket No. 34982-85, shows this date.
Respondent filed a notice of intent not to file a surrebuttal
brief on Sept. 30, 1992.
                                - 5 -

suspended the implementation of the basis of settlement for the

TEFRA Swanton programs until the litigation phase of the pre-

TEFRA cases had concluded.

        Asher’s tax matters partner (TMP) signed a closing

agreement with respect to Asher’s tax liabilities on July 9,

1997.    It was countersigned by respondent on December 10, 1998.

     On August 20, 1999, respondent sent petitioner a letter

explaining that the examination of Wilshire had been completed.

Respondent also sent petitioner Form 4549A-CG, Income Tax

Examination Changes (notice of adjustment), notifying petitioner

that his 1983 taxable income had been adjusted by $12,542 and his

1984 income had been adjusted by $718.    These adjustments

resulted in deficiencies of $5,226 for 1983 and $773 for 1984.

In October 1999, petitioner paid the deficiencies.    On November

1, 1999, respondent assessed petitioner’s deficiencies and

interest and issued petitioner a letter stating that petitioner

owed $23,915.94 of section 6621(c) interest for 1983.    Also on

November 1, 1999, respondent issued petitioner a letter stating

that he owed $2,198.97 of section 6621(c) interest for 1984.

     On November 8, 1999, petitioner filed Form 843, Claim for

Refund and Request for Abatement, requesting abatement of the

interest that had accrued from 1983 to 2000.    On February 19,

2002, respondent issued a letter entitled “Partial Allowance-

Final Determination” (notice of determination) to petitioner.      In
                              - 6 -

the notice of determination, respondent granted interest

abatement for the period August 9, 1997 (31 days after the

closing agreement for Asher was signed by Asher’s TMP), through

December 10, 1998 (the date respondent countersigned the closing

agreement), and denied petitioner’s request for interest

abatement for the periods April 15, 1984, through August 9, 1997,

and December 10, 1998, through December 1, 2000.   Petitioner

timely filed a petition in this Court, requesting review of

respondent’s determination to deny in part his request for

interest abatement for the period April 15, 1984, through August

1, 1999.

                             OPINION

     As applicable to the years in question, section

6404(e)(1)(B) provides that the Commissioner may abate all or any

part of an assessment of interest on any payment of certain taxes

to the extent that any error or delay in such payment is

attributable to an officer or employee of the IRS “being

erroneous or dilatory in performing a ministerial act”.6   A

ministerial act is a procedural or mechanical act that does not

involve the exercise of judgment or discretion and that occurs



     6
       Congress amended sec. 6404(e) in 1996 to permit abatement
of interest for “unreasonable” error or delay in performing a
ministerial or “managerial” act. Taxpayer Bill of Rights 2, Pub.
L. 104-168, sec. 301(a), 110 Stat. 1457 (1996). That standard
applies only to tax years beginning after July 30, 1996, and thus
does not apply in the present case. Id. sec. 301(c).
                                 - 7 -

during the processing of a taxpayer’s case after all

prerequisites to the act, such as conferences and review by

supervisors, have taken place.     Lee v. Commissioner, 113 T.C.

145, 150 (1999); see also sec. 301.6404-2T(b)(1), Temporary

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

Abatement is available under section 6404(e) only for periods

after the IRS has contacted the taxpayer in writing with respect

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

      This Court may order an abatement of interest only when the

Commissioner has abused his discretion in denying a taxpayer’s

request to abate interest.    Sec. 6404(h).   To show an abuse of

discretion, a taxpayer must prove that the Commissioner exercised

this discretion arbitrarily, capriciously, or without sound basis

in fact or law.   Woodral v. Commissioner, 112 T.C. 19, 23 (1999).

I.   Respondent’s Failure To Notify Petitioner

      Petitioner argues that it was an abuse of discretion for

respondent to fail to notify him of his 1983 and 1984 tax

deficiencies until August 20, 1999.      The TEFRA procedures require

the Commissioner to notify certain partners of the beginning and

ending of a partnership audit.    Sec. 6223(a).   The Commissioner

is not required to give notice to a partner if the partnership

has more than 100 partners and the partner has less than a 1-

percent profits interest.    Sec. 6223(b)(1).   In the case of an

indirect partner owning an interest in the partnership through a
                               - 8 -

pass-thru entity, the Commissioner is required to give notice to

such partner in lieu of the pass-thru entity that would otherwise

be entitled to notice, if the indirect partner’s name, address,

and profits interest is provided.    Sec. 6223(c)(3).

     The Commissioner’s duty to notify under section 6223(a) is

triggered only if the names, addresses, and profits interests of

partners and indirect partners are provided to the IRS in one of

two forms described in section 6223(c).     They must be furnished

either on the tax return of the partnership being audited, or in

a statement to the IRS that fulfills the requirements of section

301.6223(c)-1T, Temporary Proced. & Admin. Regs., 52 Fed. Reg.

6784 (Mar. 5, 1987).   Sec. 6223(c).    The IRS also may use other

information that is available to it; however, it is not required

to “search its records” to obtain information not provided in the

forms required by section 6223(c).     Sec. 301.6223(c)-1T(f),

Temporary Proced. & Admin. Regs., supra.7

     In this case, the IRS was required to, and did, notify Asher

of the Wilshire audit.   Sec. 6223(a).    Wilshire’s partnership

return would have indicated Asher’s name, address, and profits

interest, and would also have indicated the number of partners

that Wilshire had.   Nothing in the record indicates that the

Wilshire partnership return listed the individual Asher partners.


     7
      The temporary regulations were in effect for the year in
issue; the Commissioner published final regulations effective
Oct. 4, 2001. Sec. 301.6223(c)-1(g), Proced. & Admin. Regs.
                                 - 9 -

Although the IRS could have discovered this information using its

own records, in this case it chose not to.     As a result,

petitioner was not entitled to receive personal notification by

the IRS of the Wilshire audit.    Instead, Asher’s TMP was required

to notify petitioner of the partnership level proceedings.       Sec.

6223(g) and (h)(2).

II.   Consistent Settlement Issue

      Petitioner next argues that he is entitled to abatement of

interest for the same period that the Commissioner granted

abatement of interest to the taxpayer in Beagles v. Commissioner,

T.C. Memo. 2003-67.   Like petitioner, the taxpayer in Beagles was

an indirect investor in Wilshire, through a second-tier

partnership.   She requested abatement of interest for the entire

period between 1984 and 2000.    The Appeals officer granted her

request for the period May 8, 1992, through April 15, 1999, the

date on which a closing agreement was signed by that second-tier

partnership with respect to its 1983 and 1984 Wilshire

investments.

      Section 6224(c) requires the Commissioner to offer

consistent settlement terms to partners with respect to the tax

treatment of partnership items.     Petitioner’s liability for

increased interest under section 6621(c) is not a “partnership

item”; it is, instead, an “affected item” that relates to

partnership items but must be determined at the individual level.
                                - 10 -

See also Hirshfield v. United States, 88 AFTR 2d 2001-6236, 2001-

2 USTC par. 50,480 (S.D.N.Y. 2001); cf. Sainte-Yves v.

Commissioner, T.C. Memo. 2002-158.       Consequently, the

requirements of section 6224(c) do not apply to concessions

involving interest abatement.    Cinema ‘84 v. Commissioner, 294

F.3d 432, 439-440 (2d Cir. 2002), affg. 111 T.C. 198 (1998);

Sainte-Yves v. Commissioner, supra.       Therefore, section 6224 does

not require respondent to offer the same terms regarding interest

abatement to petitioner that were offered to Mrs. Beagles.

     We review respondent’s actions for abuse of discretion.

Petitioner argues that respondent abused his discretion because

he did not offer the same terms to him as were offered to Mrs.

Beagles.   Petitioner’s position is inconsistent with the

principle that respondent reviews each case in light of its

specific facts and circumstances.    However, if respondent’s

actions with respect to petitioner’s settlement violated the duty

of consistency, which has been recognized by this Court in other

contexts, there is a potential for abuse of discretion.

     As stated above, the importance of consistency of tax

compromises has been previously recognized by this Court.       Penn-

Field Indus., Inc. v. Commissioner, 74 T.C. 720, 722 (1980);

Fresoli v. Commissioner, T.C. Memo. 1988-384; Avers v.

Commissioner, T.C. Memo. 1988-176.       However, this duty must be

balanced against the settlement discretion given to the IRS,

which is “at its heart a discretion to treat similarly situated
                                - 11 -

taxpayers differently.”     Bunce v. United States, 28 Fed. Cl. 500,

509 (1993), affd. without published opinion 26 F.3d 138 (Fed.

Cir. 1994); see also Fresoli v. Commissioner, supra.       In

implementing the balance, this Court requires the taxpayer to

show that:    (1) Other similarly situated taxpayers received more

favorable settlements, and (2) the IRS’ discriminatory selection

of it was based on a suspect classification or any irrational or

arbitrary classification.     Penn-Field Indus., Inc. v.

Commissioner, supra at 723; Fresoli v. Commissioner, supra.

Disparate treatment of investors in the same venture is

permissible if there is a rational basis for such treatment.

Avers v. Commissioner, supra.

       Petitioner has shown that he and Mrs. Beagles invested in

similar partnerships, but not that the facts regarding abatement

were in all respects similar.    In addition, petitioner has not

shown that he was denied the same period of interest abatement

that Mrs. Beagles received because of discrimination based on an

impermissible classification.    Therefore, we conclude that

petitioner is not entitled to interest abatement on the same

terms that Mrs. Beagles was granted interest abatement.

III.    Validity of the Assessment

       Petitioner argues in his answering brief that respondent was

barred by the period of limitations from assessing any tax
                                - 12 -

against him.   He claims that respondent was required to assess

any tax within 1 year from the time Asher signed the closing

agreement on July 9, 1997.   Ordinarily, we would not address a

new issue raised on brief.   However, we will briefly address it

here because petitioner is a pro se taxpayer and because there is

no merit to the position.

      Section 6229(f)(1) provides that, with respect to items

becoming nonpartnership items, “the period for assessing any tax

imposed by subtitle A which is attributable to such items (or any

items affected by such items) shall not expire before the date

which is 1 year after the date on which the items become

nonpartnership items”.   The partnership items of a partner become

nonpartnership items when “the Secretary * * * enters into a

settlement agreement with the partner with respect to such

items”.   Sec. 6231(b)(1)(C).   A settlement agreement is not

entered into until both the partner and the Secretary have signed

it.   Therefore, the period of limitations began to run on the

date respondent countersigned Asher’s closing agreement, December

10, 1998, and the assessment, which was made on November 1, 1999,

is valid.

IV.   Was There An Abuse of Discretion?

      We now examine the events of each relevant period in

petitioner’s case, which are described in the table below.
                                - 13 -

          Activity                               Date

Petitioner files his 1983                 Apr. 15, 1984
  return

Petitioner files his 1984                 Aug. 12, 1985
  return

Pre-TEFRA test cases begin                1989
  in Tax Court

Ms. Sullivan is assigned to               May 1991
  Swanton programs

Tentative basis of settlement             September 1991
  is reached for TEFRA
  Swanton programs

Respondent files last brief in            Aug. 14, 1992
  pre-TEFRA Swanton Tax Court
  litigation

Final agreement on terms of               September 1993
  settlement is reached.

Asher’s TMP signs closing                 July 9, 1997
  agreement

Respondent countersigns                   Dec. 10, 1998
  Asher’s closing agreement

Respondent issues notice of               Aug. 20, 1999
  adjustment to petitioner

     A.    April 15, 1984, Through May 8, 1992

     We held in Beagles v. Commissioner, T.C. Memo. 2003-67, that

the Commissioner was not erroneous or dilatory in performing a

ministerial act with respect to the Swanton programs between

April 15, 1984, and May 8, 1992.    See also Deverna v.

Commissioner, T.C. Memo. 2004-80.    We will briefly describe the

events that support this holding.
                               - 14 -

       Respondent suspended his activity with respect to the

Swanton programs from April 1984 until the period of limitations

for criminal prosecution of Mr. Swanton expired because Mr.

Swanton was being criminally investigated by DOJ.    We have

previously held that the delay of a civil matter until resolution

of related criminal proceedings is reasonable.    Taylor v.

Commissioner, 113 T.C. 206, 212 (1999), affd. 9 Fed. Appx. 700

(9th Cir. 2001).    After the criminal investigation of Mr. Swanton

ended, litigation in this Court for the pre-TEFRA Swanton

programs continued until September 1992.    See Smith v.

Commissioner, 92 T.C. 1349 (1989); Kelley v. Commissioner, T.C.

Memo. 1993-495.    The mere passing of time during the litigation

phase of a tax dispute does not establish error or delay by the

Commissioner in performing a ministerial act, because decisions

about how to proceed in the litigation phase of a case

necessarily involve discretion.    Lee v. Commissioner, 113 T.C. at

150.    We therefore conclude, as this Court did in Beagles v.

Commissioner, supra, that it was not an abuse of discretion for

respondent to deny abatement of interest for the period April 15,

1984, through May 8, 1992.

       Beagles v. Commissioner, supra, does not provide us with

guidance for periods after May 8, 1992, because in that case the

Commissioner granted interest abatement to the taxpayer for the
                                - 15 -

period May 8, 1992, through April 15, 1999.      We therefore must

review the events that occurred after May 8, 1992, to determine

whether respondent abused his discretion.

     B.    May 9, 1992, Through September 1993

     From May 9 to August 14, 1992, respondent was involved in

litigation before this Court concerning the pre-TEFRA Swanton

programs.     In accordance with our holding above, it was not an

abuse of discretion for respondent to deny interest abatement for

that period.     See Lee v. Commissioner, supra at 150.

     After the completion of the pre-TEFRA Tax Court litigation,

Ms. Sullivan negotiated with counsel for the TEFRA Swanton

programs regarding the final terms of settlement until September

1993.     The TEFRA Swanton settlement work was added to Ms.

Sullivan’s normal caseload.     According to her testimony, because

she was not assisted by any other attorney, she could not

finalize the terms of settlement while briefing the pre-TEFRA

cases.     The settlements could have been completed more quickly if

more than one person had regularly been working on them.

Arguably, respondent made a managerial error when he assigned

only one employee to handle the settlement of all of the TEFRA

partnerships.     This managerial decision contributed to the delay

in the resolution of petitioner’s case after the overall

settlement was reached.
                               - 16 -

     Under current law, section 6404(e) would authorize abatement

of interest during periods in which the settlement of the

Wilshire case was delayed as a result of managerial errors.

However, the language added to section 6404(e) permitting the

abatement of interest for unreasonable errors or delays in

performing managerial acts applies only to tax years beginning

after July 30, 1996, and thus does not apply in the present case.

Taxpayer Bill of Rights 2, Pub. L. 104-168, sec. 301(c), 110

Stat. 1452, 1457 (1996).

     For years prior to 1996, section 6404(e) allows interest

abatement only for errors or delays by an officer or employee of

the IRS in performing ministerial acts.   Respondent’s decision to

assign only one attorney to the Swanton TEFRA cases was not a

ministerial act, because the decision required discretion and

judgment.   See Mekulsia v. Commissioner, T.C. Memo. 2003-138;

Beagles v. Commissioner, supra; Jacobs v. Commissioner, T.C.

Memo. 2000-123; sec. 301.6404-2T(b)(2), Examples (4) and (5),

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

1987).   The settlement negotiations that lasted until September

1993 also were not ministerial.   Therefore, through September

1993, the delay was not due to a ministerial act.   However,

further analysis is necessary in order to determine whether any

ministerial errors by respondent contributed to the subsequent

delays in petitioner’s case.
                               - 17 -

     C.   October 1993 Through July 9, 1997

     After the terms of settlement were resolved, it took Ms.

Sullivan a number of years to send out closing agreements to the

Wilshire investors because she was attempting to get the consent

of all the Wilshire investors and settle on the partnership

level.    At some point, Ms. Sullivan changed her mind and decided

to send an individual closing agreement to each Wilshire

investor.   Because Mrs. Sullivan’s implementation of this

settlement strategy was not ministerial, no abatement is required

for the period when she was attempting to obtain unanimous

consent from the Wilshire partners, including from the

nonconsenting Wilshire investor.    Nothing in the record indicates

when Ms. Sullivan made the decision to change the settlement

strategy, or when she actually sent out the individual closing

agreements.

     Recently, this Court held that it was not a ministerial

error for respondent to send out closing agreements for a similar

Swanton partnership as late as September 9, 1995.    Deverna v.

Commissioner, T.C. Memo. 2004-80.    If an even greater delay were

shown, a further examination of respondent’s actions after that

date would be warranted.   However, petitioner has not presented

any evidence, from Asher’s TMP or otherwise, that indicates when

respondent sent out Asher’s closing agreement.   In fact, the only

date in the record relevant to Asher’s closing agreement is the
                              - 18 -

date Asher’s TMP signed it, July 9, 1997.    Without more

information about when Asher’s TMP received the closing

agreement, or when Ms. Sullivan sent it out, we cannot find that

there was a delay by respondent in performing a ministerial act,

since the additional delay in this instance was likely the result

of the problem with the nonconsenting Wilshire partner’s

acceptance and the eventual failure of Ms. Sullivan’s settlement

strategy.   Therefore, it was not an abuse of discretion for

respondent’s Appeals officer to deny interest abatement for the

period October 1993 through July 9, 1997.

     D.   December 11, 1998, Through August 1, 1999

     After the Asher closing agreement was countersigned,

respondent adjusted petitioner’s 1983 and 1984 returns according

to the terms of the closing agreement and, on August 20, 1999,

issued petitioner the notice of adjustment.    Respondent followed

regular IRS procedures in the processing of petitioner’s notice

of adjustment, and there is no evidence that respondent was

dilatory in performing a ministerial act during this period.   We

conclude that it was not an abuse of discretion for respondent to

deny petitioner’s request for interest abatement for the period

December 11, 1998, through August 1, 1999.


                                    Decision will be entered

                               under Rule 155.
