                         T.C. Memo. 2001-290



                       UNITED STATES TAX COURT



         ROBERT A. AND NANCI M. SPURGIN, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11196-00.                   Filed November 2, 2001.


     Robert A. and Nanci M. Spurgin, pro sese.

     Michael A. Skeen, 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

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.


     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 -

                OPINION OF THE SPECIAL TRIAL JUDGE

     ARMEN, Special Trial Judge:   On May 9, 2000, respondent

issued a notice of final determination denying petitioners’ claim

to abate interest for the taxable year 1993.   Petitioners timely

filed a petition under section 6404(i) and Rules 280-284.2

     The issue for decision is whether respondent abused his

discretion by denying petitioners’ claim for abatement of

interest for the taxable year 1993.    We hold that respondent did

not abuse his discretion.

                         FINDINGS OF FACT

     Many of the facts have been stipulated, and they are so

found.   Petitioners resided in Irvine, California, at the time

that their petition was filed with this Court.

A.   Petitioners’ 1993 Tax Return and Unpaid Tax Liability

     Prior to 1993, Robert Spurgin (petitioner) invested in a

partnership known as “IWF North America” (IWF).   Including

petitioner, there were a total of five partners in IWF.

     In 1990, a dispute arose among the partners regarding the

allocation of a $3 million distribution to be made by IWF.

Petitioner sued the other partners in order to resolve the


     2
        Sec. 6404(i) was originally enacted as sec. 6404(g) by
the Taxpayer Bill of Rights 2 (TBOR 2), Pub. L. 104-168, sec.
302, 110 Stat. 1457 (1996). Sec. 6404(g) was redesignated as
sec. 6404(i) by the Internal Revenue Service Restructuring &
Reform Act of 1998, Pub. L. 105-206, secs. 3505(a), 3309(a), 112
Stat. 743, 745. However, Title XXVII of the Tax Court Rules of
Practice and Procedure, dealing with actions for review of
failure to abate interest, continues to reflect the original
statutory designation.
                                - 3 -

dispute.   Pursuant to a court order, petitioners received a

distribution in 1993 from IWF in the amount of $206,000.

     In order to gauge their Federal income tax liability for

1993, petitioners consulted with a certified public accountant,

Brian Ringler, who provided petitioners with his estimate of

their liability.    Thereafter, in September 1993, petitioners made

an estimated tax payment in the amount of $30,000.   In January

1994, petitioners made a second estimated tax payment in the

amount of $2,360.

     In April 1994, petitioners received Schedule K-1, Partner’s

Share of Income, Credits, Deductions, etc., from IWF.    The

Schedule K-1 revealed that petitioner’s distributive share of

partnership income was as follows:

           Ordinary Income                   $262,045
           Other Portfolio Income             -85,000
           Schedule E Activity Income         177,045

           Interest (investment income)         45,581

     Petitioners retained Brad Gillespie, a certified public

accountant, to prepare their Federal income tax return for 1993.

Relying on the aforementioned Schedule K-1 and other information,

Mr. Gillespie determined petitioners’ tax liability as follows:
                                   - 4 -

                Total tax                       $62,602
                Less: estimated tax payments
                        Sept. 1993   $30,000
                        Jan. 1994      2,360    -32,360
                Less: deferral of additional
                        1993 taxes1              -1,963
                Balance                          28,279
                Plus: estimated tax penalty         111
                Amount owed                      28,390
        1
      For 1993, taxpayers could elect to defer two-thirds of
their additional 1993 taxes that were due solely to the rate
increases reflected in the 1993 tax rate schedules. Omnibus
Budget Reconciliation Act of 1993, Pub. L. 103-66, sec. 13201(d),
107 Stat. 459-461. Petitioners so elected by attaching Form
8841, Deferral of Additional 1993 Taxes, to their timely filed
return.
     Petitioners remitted $500 with their 1993 return, but they

made no further payment against their tax liability until August

1997.       See infra “E”.

     By notice dated June 13, 1994, respondent notified

petitioners that they did not qualify for deferral of additional

1993 taxes because they had failed to make sufficient payment

toward their reported liability.3      Respondent also notified

petitioners that the amount owed was $31,602, determined as

follows:
               Tax as reported                 $62,602.00
               Less: Estimated tax payments    -32,360.00
                     Payment with return          -500.00
               Unpaid tax                       29,742.00
               Plus: estimated tax penalty       1,224.45
                     Late payment penalty          297.42
                     Interest                      338.41
               Amount owed                      31,602.28

Finally, respondent requested that petitioners pay the amount

     3
        In order to qualify for deferral of additional 1993
taxes, a taxpayer was required to pay at least 90 percent of a
specified liability. See Notice 93-51, 1993-2 C.B. 337.
                               - 5 -

owed by June 23, 1994, in order “to avoid more interest and

penalties.”

B.   Petitioners’ Attempts To Obtain a Loan

     In 1994, petitioners tried three times to obtain a loan in

order to satisfy their outstanding tax liability.

     Prior to April 28, 1994, petitioners applied for a $200,000

home equity line of credit from Union Bank.   By statement dated

April 28, 1994, Union Bank declined to extend credit to

petitioners for the following reasons:    (1) “Income insufficient

for amount of credit requested” and (2) “Excessive obligations in

relation to income”.

     Prior to May 25, 1994, petitioners applied for a “home

equity line of credit increase” from First Interstate Bank.    By

letter dated May 25, 1994, First Interstate Bank declined

petitioners’ application for the following reasons:    (1) “Your

obligations are excessive” and (2) “Your credit history of making

payments when due is not satisfactory.”

     Prior to August 5, 1994, petitioners applied for a home

equity loan from The Prudential Savings Bank, F.S.B.    By notice

dated August 5, 1994, The Prudential Savings Bank denied

petitioners’ request for credit for the following reason:

“Insufficient income for amount of credit requested”.
                              - 6 -

C.   The Collection Process

     By letter dated July 14, 1994, petitioner acknowledged

receipt of respondent’s notice dated June 13, 1994, requesting

payment of petitioners’ outstanding tax liability.   Petitioner

stated that he was “unable to pay the full amount at this time”

and that he “would like to explore the opportunity of paying the

tax in installments or some other mutually agreeable

alternative.”

     By letter dated September 2, 1994, respondent replied to

petitioner’s aforementioned letter, stating in part as follows:

     Because of the amount you still owe on your current
     installment agreement, we need to review your financial
     condition. Please complete the enclosed Form 433-F,
     Collection Information Statement, and return it within
     10 days.

Whether petitioners ever returned Form 433-F to respondent is not

established by the record, nor is there any indication that the

parties ever had any further discussion regarding an installment

agreement for the taxable year 1993.

     By notices dated October 17, 1994, November 21, 1994, and

December 26, 1994, respondent continued to advise petitioners

that payment of their 1993 tax liability was overdue.   Indeed,

the third such notice advised petitioners of respondent’s intent

to levy if petitioners failed to pay their tax liability.

     By letter dated February 22, 1995, petitioners were advised

that their case had been transferred to respondent’s Problem
                              - 7 -

Resolution Office in order to “better serve you in clearing up

the problem you are having with your taxes.”4   Linda Caballero, a

problem resolution technician, was assigned to petitioners’ case.

Ms. Caballero requested that petitioners complete Form 433-A,

Collection Information Statement for Individuals, and Form 433-B,

Collection Information Statement for Businesses.   Petitioners

completed Forms 433-A and 433-B and forwarded the forms to Ms.

Caballero.

     After reviewing Forms 433-A and 433-B and accepting the

information therein at face value, Ms. Caballero informed

petitioners as follows:

     This letter confirms our telephone conversation on 12-
     21-95 concerning your 1993/1040 tax liability. Based
     on the financial information statement you submitted, I
     have determined that you are currently unable to make
     payments toward your tax liability. Therefore, your
     account is being placed in a currently uncollectible
     status.[1] * * * this suspension is temporary and
     interest and/or penalties will continue to accrue until
     the tax is paid in full. In addition, * * * a Federal
     Tax lien is being filed to protect the government’s
     interest in this matter.[2]
     1
       When a taxpayer’s account is placed in uncollectible
status, the Commissioner does not attempt to enforce collection
against the taxpayer.
     2
       On Feb. 21, 1996, respondent filed a Notice of Federal Tax
Lien with the County Recorder for Orange County in Santa Ana,
California. The lien was released on Sept. 14, 1997, shortly


     4
        On Mar. 8, 1995, shortly after petitioners’ account had
been transferred to the Problem Resolution Office, respondent
served a notice of levy on First Interstate Bank of California.
The levy was released on Mar. 20, 1995, presumably because
petitioners’ case had been transferred to the Problem Resolution
Office, without the collection of any funds.
                               - 8 -

after petitioners’ 1993 liability was fully satisfied.     See infra
“E”.

     At this time we are closing your case out of the
     Problems Resolution Program and apologize for any
     inconvenience we may have caused you.

     Petitioners’ 1993 account remained in uncollectible status

until July 11, 1997.

D.   Petitioners’ Efforts To Compromise Their 1993 Tax Liability

     By virtue of section 7122(a), the Commissioner is authorized

to compromise a taxpayer’s tax liability.   Pursuant to that

authority, the Commissioner has published directives regarding

offers in compromise.5   See Internal Revenue Manual (IRM), sec.

57(10)0 (Feb. 26, 1992) et seq.   Form 656, Offer in Compromise,

is the form that respondent has designed for use by a taxpayer

who wishes to submit an offer in compromise.

     When an offer in compromise is received from a taxpayer, a

determination is made by an offer technician whether the offer is

“processable”.   IRM, sec. 57(10)9.1(1) (Feb. 26, 1992).   An offer

that is processable is assigned to a collection officer,

typically a revenue officer, for investigation and evaluation.

An offer that is “unprocessable” is returned to the taxpayer.


     5
        We note that the enactment of sec. 7122(c), relating to
the evaluation of offers in compromise, because it applies to
offers in compromise submitted after July 22, 1998, does not
apply in this case. The same is true of the temporary
regulations published thereunder, which are applicable to offers
in compromise submitted on or after July 21, 1999, through July
19, 2002. See sec. 301.7122-1T(j), Temporary Proced. & Admin.
Regs., 64 Fed. Reg. 39027 (July 21, 1999).
                                   - 9 -

IRM, sec. 57(10)9.1(1)-(2) (Feb. 26, 1992).

       An offer is unprocessable if:       (1) The taxpayer is not

identified; (2) the liabilities to be compromised are not

identified; (3) no amount is offered; (4) appropriate signatures

are not present; (5) financial statement is not provided; (6) the

offer does not reasonably reflect net equity in assets on Forms

433-A and 433-B and amounts recoverable from future income

sources, as reflected on financial statements;6 (7) an obsolete

Form 656 is used; or (8) the taxpayer alters the terms on Form

656.       IRM, sec. 57(10)9.1(3) (Feb. 26, 1992).

       1.     Petitioners’ First Offer in Compromise

       On September 19, 1994, petitioners submitted Form 656,

offering to compromise their 1993 tax liability for $5,000 on the

ground of doubt as to collectibility.         Petitioners submitted

Forms 433-A and 433-B in support of their offer.

       By letter dated December 20, 1994, respondent advised



       6
            However, the Internal Revenue Manual cautions:

       judgment should be exercised when deciding whether to
       return an offer as unprocessable for this reason alone.
       It may be desirable to receive an offer into inventory
       which does not technically meet this criterion. This
       would apply if the amount offered is close enough to
       the sum of net equity from Forms 433-A and 433-B, and
       amounts recoverable from future income sources that
       successful negotiation with the taxpayer could be
       pursued.

IRM, sec. 57(10)9.1(3)(f) (Feb. 26, 1992).
                                - 10 -

petitioners that their offer could not be considered because “The

financial information you provided shows you have sufficient

equity and/or income to pay the liability in full now or by an

installment agreement.”

     By a second letter, also dated December 20, 1994, respondent

invited petitioners to attend a workshop on January 17, 1995,

regarding the preparation of offers in compromise.    Petitioners

were informed:

          The goal of this workshop is to assist you in
     preparing an offer in compromise that can be processed
     for further investigation by the Service. * * *
     Attending the workshop does not guarantee acceptance of
     your offer, but it will give you important information
     and assistance.

Petitioner attended the workshop.

    2. Petitioners’ Second, Third, and Fourth Offers in
Compromise

     On February 14, 1995, respondent received a second offer in

compromise from petitioners.    On March 22, 1995, respondent

mailed a letter to petitioners informing them that their second

offer could not be processed.

     On April 26, 1995, respondent received a third offer in

compromise from petitioners.    On May 31, 1995, respondent mailed

a letter to petitioners informing them that their third offer

could not be processed.

     On July 12, 1995, respondent received a fourth offer in

compromise from petitioners.    On August 10, 1995, respondent
                                - 11 -

mailed a letter to petitioners informing them that their fourth

offer could not be processed.

     3.   Petitioners’ Fifth Offer in Compromise

     On August 24, 1995, respondent received a fifth offer in

compromise from petitioners.    On September 26, 1995, respondent

mailed a letter to petitioners informing them that their fifth

offer could not be processed for a variety of reasons, including

the following:

          You didn’t correctly identify the liability(s)
     that you want to compromise. Please see Form 656, and
     refer to page 6, “How to Complete Form 656", item 4.

          You didn’t attach Form 433A, Collection
     Information Statement for Individuals and/or Form 433B,
     Collection Information Statement for Businesses.

          Please fill out a new 433A, the financial
     information is over a year old. If your wife still
     owns a business you will need a 433B also. Your tax
     liability for 1994 must also be listed on the Form 656.

     4.   Petitioners’ Sixth Offer in Compromise

     On October 4, 1995, respondent received a sixth offer in

compromise from petitioners.    On November 1, 1995, respondent

mailed a letter to petitioners informing them that their sixth

offer could not be processed for the following reason:

          The amount you offered doesn’t equal or exceed the
     minimum offer as described on Form 656, page 5, “How to
     Figure an Acceptable Offer”. You must offer an amount
     which equals or exceeds the sum of (a) the amount shown
     on line 30, Form 433-A, Collection Information
     Statement for Individuals and/or line 27 column D, Form
     433-B, Collection Information Statement for Businesses
                                - 12 -

     and (b) the amount we could collect from your present
     and future income as shown on page 4 of the Collection
     Information Statement.

     5.   Petitioners’ Seventh Offer in Compromise

     On November 20, 1995, respondent received a seventh offer in

compromise from petitioners.    Respondent determined that

petitioners’ seventh offer could be processed and so advised

petitioners by letter dated January 9, 1996.

           a.   Investigation of the Seventh Offer

     The investigator assigned to review and evaluate

petitioners’ offer was Revenue Officer Dewey Marine (Mr. Marine).

On May 9, 1996, Mr. Marine requested additional information from

petitioners in order to determine whether the amount of their

offer ($16,200) was adequate.    Petitioners did not provide the

requested additional information within the specified time

period.

           b.   Rejection of the Seventh Offer

     By letter dated May 31, 1996, respondent rejected

petitioners’ seventh offer because “you haven’t given us

enough information to determine if the amount of your offer is

adequate.”

           c.   Reconsideration of the Seventh Offer

     By letter dated June 6, 1996, petitioner provided the

additional information previously requested and asked Mr. Marine
                              - 13 -

to reconsider petitioners’ seventh offer.   Mr. Marine agreed to

do so.

     On February 12, 1997, Mr. Marine rejected petitioners’

seventh offer on the ground that the amount of the offer was

inadequate.   In this regard, Mr. Marine determined that

petitioners could afford to pay more, at least for offer in

compromise purposes, than what they had offered to pay.    Mr.

Marine based this conclusion on his determination of the

differential between petitioners’ monthly income and petitioners’

necessary living expenses.   In determining petitioners’ necessary

living expenses, Mr. Marine considered, inter alia, costs for

housing and utilities, educational costs for petitioners’

children, and costs for life insurance.

     Mr. Marine determined costs for housing and utilities by

reference to “local standards” that were developed by

respondent’s National Office, based on data provided by the

Census and the Bureau of Labor Statistics, and published in the

Internal Revenue Manual on November 2, 1995.   IRM, sec.

5323.433(3)(a).   Because petitioners’ actual costs for housing

and utilities exceeded the maximum allowance set forth in the

local standards for Orange County, California, Mr. Marine

utilized the local standards.7


     7
        In discussing the purpose behind the local standards,
Internal Revenue Manual, sec. 5323.433(3)(a)(1)-(3) (Nov. 2,
                                                   (continued...)
                                - 14 -

     Mr. Marine also determined that certain “life-style choices”

made by petitioners, namely, petitioners’ purchase of whole life

insurance rather than less costly term insurance and petitioners’

decision to send their children to private rather than public

school, gave rise to increased expenses that could not be

considered in determining petitioners’ necessary living expenses

for offer in compromise purposes.

            d.   The Final Exchange of Correspondence

     Petitioner was advised that the seventh offer had been

rejected in a telephone call initiated by Mr. Marine on February

12, 1997.    Petitioner was also advised of the bases on which the

offer had been rejected, specifically including Mr. Marine’s

application of the local standards for housing and utilities.

Prior to this conversation, petitioner had not been aware of the

local standards.



     7
      (...continued)
1995) provides in part as follows:

     The housing and utilities standard will provide the
     basis for determining whether a taxpayer will be
     required to pay the Service an amount equal to
     excessive or not-allowable housing expenses. When
     deciding whether a taxpayer should be required to pay
     the Service an amount equal to excessive or not-
     allowable housing expenses, consider:
          (1) the increased cost of transportation to work
     and school which would result from moving to lower-cost
     housing;
          (2) the tax consequences which would result from
     selling a home. * * * ; and
          (3) the cost of moving to a new residence.
                                 - 15 -

     On February 14, 1997, petitioner faxed Mr. Marine a letter

dated February 13, 1997.      The letter acknowledged:

     The rejection of my offer is based largely upon the
     surplus between my living expenses as you have
     calculated them and my current monthly income. A
     significant part of that evaluation involves the
     government-imposed housing expense limit of $1500.00[1]
     per month, which as you indicated is in reality quite
     low.
     1
      Actually, $1,568.

The letter also proposed that petitioners’ outstanding liability

“be capped at the original amount of the remaining tax balance,

$29,600,8 payable in 60 equal monthly payments of $500.00".

     By letter dated February 18, 1997, Mr. Marine advised

petitioner that his proposal to “cap” petitioners’ outstanding

liability could not be honored because of the statutory

requirement that “interest and penalty be collected on delinquent

liabilities.”    The letter concluded as follows:

     As we discussed in our recent telephone conversation,
     your ability to make payments (based on Offer in
     Compromise criteria) is the major stumbling block in
     the consideration of your offer. Your “life-style
     choices”, although commendable, on the expenditure of
     your available funds will always be a deterrent.

     The offer program is meant for those who truly do not
     have the assets or ability to pay. Clearly, this is
     not the case with you.

     Should you have any further questions, please feel free
     to contact me. Perhaps an installment agreement can be
     made with the office closest to you.



     8
         Actually, $29,742.   See supra p. 4.
                              - 16 -

E.   Payment of Petitioners’ Tax Liability

      By letter dated August 18, 1997, petitioners informed

respondent that they had obtained a loan to satisfy their

outstanding tax liability for 1993.     Shortly thereafter, on

August 27, 1997, petitioners paid their liability in full.

F.   Notice of Determination and Commencement of Litigation

      By notice of determination dated May 9, 2000, respondent

disallowed, in full, petitioners’ request for abatement of

interest9 on the ground that “We found no ministerial errors or

delays on the part of the Internal Revenue Service that warrant

abatement of interest in your case.”

     On November 6, 2000, petitioners commenced an action in this

Court by filing a petition, pursuant to section 6404(i) and Rules

280-284, for review of respondent’s failure to abate interest

with respect to the taxable years 1993.10

                              OPINION

      In general, interest on an underpayment of income tax begins


      9
        The evidentiary record does not include a copy of
petitioners’ request for abatement.
      10
       In pertinent part, sec. 6404(i) provides that “The Tax
Court shall have jurisdiction over any action brought by a
taxpayer who meets the requirements referred to in sec.
7430(c)(4)(A)(ii) to determine whether the Secretary’s failure to
abate interest under this section was an abuse of discretion, and
may order an abatement, if such action is brought within 180 days
after the date of the mailing of the Secretary’s final
determination not to abate such interest.” Petitioners meet the
net worth requirements of sec. 7430(c)(4)(A)(ii), and their
action was timely commenced. See sec. 7502(a).
                               - 17 -

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

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).

     The Commissioner has the authority to abate, in whole or in

part, an assessment of interest on a payment of income tax to the

extent that an error or delay in such payment is attributable to

an officer or employee of the Internal Revenue Service (IRS),

acting in his or her official capacity, being erroneous or

dilatory in performing a ministerial act.   See sec.

6404(e)(1)(B).11   An error or delay by the Commissioner can be

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



     11
        Sec. 6404(e) was amended in 1996 by TBOR 2 sec. 301, 110
Stat. 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 or payments for
taxable years beginning after July 30, 1996; accordingly, the
amendment is inapplicable in the present case. See Woodral v.
Commissioner, 112 T.C. 19, 25 n.8 (1999).
                                - 18 -

has contacted the taxpayer in writing with respect to the payment

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.

     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.”

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

or delay in payment that is attributable to respondent’s being

erroneous or dilatory in performing a ministerial act.12    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


     12
        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.
                                 - 19 -

other applicable Federal or State law, is not a ministerial act.

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

supra.      The mere passage of time does not establish error or

delay in performing a ministerial act.      Scott v. Commissioner,

T.C. Memo. 2000-369; Hawksley v. Commissioner, T.C. Memo. 2000-

354.

       In their petition, petitioners request that “all interest

associated with this tax year” be abated.13     However, at trial

and on brief, petitioners narrowed the scope of their request,

identifying a specific period of time over which interest should

be abated; namely, the period from the date on which the first

offer in compromise was submitted (September 19, 1994) to the

date on which petitioners first learned of the local standards

for housing and utilities (February 12, 1997).      We observe that

the September 19, 1994, date is after the date on which

respondent first contacted petitioners in writing with respect to

their unpaid tax liability for 1993.      See sec. 6404(e)(1).


       13
        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
petition, petitioners did not focus on this correlation between
the error or delay attributable to a ministerial act on
respondent’s part and a specific period of time; rather,
petitioners essentially requested that all interest with respect
to the taxable year 1993 be abated. Such request is, in effect,
a request for an exemption from interest, rather than a request
for an abatement of interest. However, the scope of such request
is beyond that contemplated by the statute. See id.
                                - 20 -

     We turn now to petitioners’ contentions, as best we

understand them, in support of their argument that interest

should be abated for the period from September 19, 1994, to

February 12, 1997.

     Petitioners contend that application of the local standards

for housing and utilities to a taxpayer’s offer in compromise is

a ministerial act that does not require the exercise of

discretion and that respondent committed a “ministerial error” by

failing to apply the local standards to petitioners until they

submitted their seventh offer.     We disagree for several reasons.

     First, we are not convinced that the premise of petitioners’

contention is correct.   Although application of the local

standards for housing and utilities is, in the first instance,

mechanical in nature, the revenue officer is nonetheless

authorized to decide whether a taxpayer should be required to pay

an amount equal to excessive or unallowable housing expenses or,

in contrast, whether the taxpayer should be allowed an amount in

excess of the local standard.     In this regard, respondent

instructs each revenue officer to consider three specific factors

in making this determination.14

     Second, the local standards for housing and utilities that

are in issue in this case were not published in the Internal

Revenue Manual until November 2, 1995.     Petitioners’ first six


     14
          See supra note 7.
                              - 21 -

offers were all determined by respondent to be unprocessable

before that date.   Accordingly, it would not have even been

possible for respondent’s agents to apply the local standards to

those six offers.

     Third, even if respondent’s agents could have divined the

future publication of the local standards, respondent’s agents

would not have had the opportunity to apply them to petitioners’

first six offers because those offers were determined to be

unprocessable.   In other words, those offers were never assigned

to a revenue officer for investigation and evaluation on their

merits.

     Fourth, and most importantly, application of the local

standards was but one step in the process of investigating and

evaluating petitioners’ offer in compromise, a process that

repeatedly called for the exercise of judgment and discretion on

the part of the revenue officer.   In contrast, a ministerial act

does not involve the exercise of judgment or discretion.   Sec.

301.6404-2T(b)(1), Temporary Proced. & Admin. Regs., supra.    We

reject petitioners' attempt to dissect a unitary process into a

series of unrelated and independent steps.

     Petitioners also contend that respondent erred by not

informing them of the local standards for housing and utilities
                                - 22 -

until February 12, 1997.15   To the extent that petitioners seek

to imply that they would have, and could have, paid their

outstanding liability any earlier than August 27, 1997, had they

known that their efforts to compromise such liability would

ultimately prove to be unsuccessful, we reject such implication

because it is unsupported by the record.    See Hawksley v.

Commissioner, supra.   Indeed, when asked by the Court at trial

what petitioners would have done differently had they known about

the local standards at an earlier date, petitioner stated that he

was not aware of any option other than to have sold his home.

The candidness of this statement is borne out by the fact that

petitioners did not make a single payment of tax after filing

their return until August 27, 1997, and by the fact that

petitioners’ account was in uncollectible status for much of the

time that is relevant to this case.

     In conclusion, the record does not reveal any error or delay

in payment of petitioners’ 1993 tax liability that is

attributable to respondent’s being erroneous or dilatory in

performing a ministerial act.    Accordingly, we hold that

respondent did not abuse his discretion in refusing to abate

interest.



     15
        Implicit in petitioners’ contention is the notion that
respondent is under a duty to inform a taxpayer of the local
standards and that the fulfillment of such duty is a ministerial
act. We need not, however, decide either matter.
                            - 23 -

    In order to give effect to our disposition of the disputed

issue,

                                       Decision will be entered

                                  for respondent.
