                        T.C. Memo. 2009-262



                      UNITED STATES TAX COURT



    ESTATE OF GERTRUDE M. BALL, DECEASED, PHILIP B. O’BRIEN,
                  ADMINISTRATOR, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 25175-07.               Filed November 18, 2009.



     Alfred J. O’Donovan, for petitioner.

     Luanne S. Dimauro, for respondent.



                        MEMORANDUM OPINION


     JACOBS, Judge:   The parties submitted this case fully

stipulated pursuant to Rule 122.   The issue for decision is

whether respondent’s denial of the Estate of Gertrude M.
                                - 2 -

Ball’s (the estate) claim for abatement of interest pursuant to

the provisions of section 6404 was an abuse of discretion.

       Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for 1994, and all Rule

references are to the Tax Court Rules of Practice and Procedure.

                             Background

       We adopt as findings of fact all statements contained in the

stipulation of facts.    The stipulation of facts and the exhibits

attached thereto are incorporated herein by this reference.

       The underlying matter involves the 1994 Federal income tax

liability of Gertrude M. Ball (sometimes referred to as Ms. Ball

or decedent), who died testate on March 31, 1995, before her 1994

income tax return was filed.    The decedent resided in Rhode

Island when she passed away.    Ellen O’Brien (Ms. O’Brien), the

decedent’s daughter, was originally appointed executrix of the

estate and represented the estate until she died on June 6, 2008.

On February 13, 2009, Philip O’Brien was appointed successor

fiduciary of the estate.

       Ms. Ball resided in the Town of New Shoreham (Block Island),

Rhode Island (the town), for most of her adult life.    Before 1994

Ms. Ball sold a one-half interest in a parcel of real property to

the town after it threatened to condemn the property for public

use.    Ms. Ball had a low basis in that property.   Her attorney at

the time (the original attorney) advised Ms. Ball that she could
                              - 3 -

defer recognition of gain on the sale of the property if she

reinvested the sale proceeds in like-kind property by the end of

the second year following the year in which the sale occurred.

The original attorney failed to inform Ms. Ball that her basis in

the original property would transfer over to any new property

acquired.

     Following the original attorney’s advice, Ms. Ball

reinvested the sale proceeds in a residence in South Kingston,

Rhode Island (the South Kingston real property), and leased that

property to an individual whom she knew.   Unbeknownst to Ms.

Ball, the lease, drafted by the original attorney, gave the

lessee an option to purchase the South Kingston real property.

On October 10, 1994, the lessee exercised the purchase option,

and the sale closed in December 1994.   Ms. Ball realized a

$381,080 gain, and incurred a $95,704 income tax liability, on

the sale of the property.

     The original attorney, who had prepared Ms. Ball’s Federal

income tax returns for many years, filed on Ms. Ball’s behalf a

request for a tax return filing extension.   The extension request

indicated that Ms. Ball had an expected 1994 income tax liability

of $28.

     At a time not specified in the record, the original attorney

was discharged, new counsel was retained, and an accountant was

engaged to prepare Ms. Ball’s 1994 Federal income tax return.    On
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the basis of the information provided to them, the accountant and

new counsel agreed that the gain recognized from the sale of the

South Kingston real property should be reported on Ms. Ball’s

1994 Federal income tax return.

     Ms. O’Brien, as the estate’s executrix, filed a Form 1040,

U.S. Individual Income Tax Return, dated May 30, 1996, for tax

year 1994.   That return reported the gain from the sale of the

South Kingston real property and the resulting income tax

liability, but the liability was left unpaid.

     On or about July 31, 1996, the Commissioner filed a proof of

claim against the estate in the Probate Court for the Town of New

Shoreham (Block Island), Rhode Island, indicating that

$145,269.30 in income tax, interest, and penalties was due the

United States.   Substantially all of this liability was

attributable to Ms. Ball’s 1994 income tax liability.1      On at

least seven occasions the estate received letters or notices from

the Internal Revenue Service (IRS) stating that tax was owed and

requesting that the amount stated in the proof of claim be paid.

The first of these letters was sent by the IRS on August 19,

1996.2   The IRS’s letter dated October 7, 1996, made the



     1
      Ms. Ball also had an outstanding Federal income tax
liability of $1,085.72, plus interest, dating from 1991.
     2
      The remaining letters and notices were dated Sept. 2, 1996,
Oct. 7, 1996, Apr. 9, 1997, Apr. 22, 1997, May 30, 2001, and Jan.
30, 2002.
                                - 5 -

situation crystal clear when it stated:   “URGENT! Immediate

action is required.   We have made several attempts to collect the

tax you owe, but we still haven’t received your full payment.     If

you don’t respond, we may seize your paycheck, bank account,

auto, or other property.   We may also file a Federal Tax Lien.”

     During this time the estate sued the original attorney,

alleging negligence in failing to advise Ms. Ball as to the

potential tax implications should the lessee exercise his option

to purchase the South Kingston real property and the attorney’s

failure to inform Ms. Ball and her family that had Ms. Ball

retained ownership of the South Kingston real property at the

time of her death, her family would have received a step-up in

the property’s basis.   That lawsuit was settled for an amount,

net of attorney’s fees, which approximated the amount of the

income tax reported as due to the United States and the State of

Rhode Island for the year 1994.

     When Ms. Ball died, the estate owned partial interests in

four condominium units and one single-family residence (the real

properties).    The remaining interests in the real properties were

held by members of Ms. Ball’s family.   One of the condominium

units was held free of debt.   The other properties were subject

to mortgages.

     Between May 30, 1996, and November 12, 1998, the estate sold

all of its interests in the real properties.   With respect to
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each sale, the estate filed a Form 4422, Application for

Certificate Discharging Property Subject to Estate Tax Lien.3    In

each case the IRS issued a Form 792, United States Certificate

Discharging Property Subject to Estate Tax Lien.

     By check dated December 21, 2004, the estate paid the

tax of $95,704 owed for 1994.    The estate requested on that date

that all applicable penalties and accrued interest be abated.

The estate justified the abatement request on the basis of the

original attorney’s negligence.

     In May 2005 the IRS agreed to abate the penalties.    The IRS

did not agree to abate the interest but instead requested that a

revised request be submitted.    On December 18, 2006, the estate

filed a Form 843, Claim for Refund and Request for Abatement,

checking Box 4a, Request for abatement or refund of interest as a

result of IRS errors or delay.    On a statement attached to Form

843, the estate maintained:

     Internal Revenue Code (Code) §6404(e) provides that the
     Service may abate all or any part of interest attributable
     to unreasonable errors or delays by the Service in
     performing a ministerial or managerial act if no
     significant aspect of such error or delay can be attributed
     to the taxpayer involved and after the Service has contacted
     the taxpayer in writing with respect to such payment;

The IRS disallowed the estate’s request for abatement of interest

by letter dated January 22, 2007.    The letter stated:   “We have



     3
      The Forms 4422 were filed on May 16 and June 24, 1996, Dec.
10, 1997, June 9, 1998, and Oct. 14, 1998, respectively.
                              - 7 -

determined that the interest due for this period was not the

result of the failure of an employee of the   Internal Revenue

Service to perform a ministerial or managerial act.”    The estate

appealed the denial of its interest abatement request to the IRS

Appeals Office via a letter dated February 6, 2007.    On May 4,

2007, the IRS Appeals Office issued a final determination letter

sustaining the denial of the interest abatement request, stating:

“We did not find any errors or delays on our part that merit

abatement of interest in our review of available records and

information.”

                           Discussion

     For tax years beginning before July 31, 1996, the

Commissioner had the authority to abate the assessment of

interest with respect to the payment of income tax attributable

“to any error or delay by an officer or employee of the Internal

Revenue Service (acting in his official capacity) in performing a

ministerial act,” sec. 6404(e)(1)(A), or “any payment of tax

described in section 6212(a) to the extent that any error or

delay in such payment is attributable to such officer or employee

being erroneous or dilatory in performing a ministerial act,”

sec. 6404(e)(1)(B), but “only if no significant aspect of such

error or delay can be attributed to the taxpayer involved, and

after the Internal Revenue Service has contacted the taxpayer in
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writing with respect to such deficiency or payment.”   Sec.

6404(e)(1) (flush language).4

     The regulations in effect during 1994 provided:

     The term “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.

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

Fed. Reg. 30163 (Aug. 13, 1987).

     If the Commissioner denies a taxpayer’s abatement of

interest request, the taxpayer may petition this Court for

review.   Sec. 6404(h)(1); see Hinck v. United States, 550 U.S.

501, 506 (2007) (holding that the Court is the exclusive forum

for judicial review of the Commissioner’s refusal to abate

interest); Baral v. Commissioner, T.C. Memo. 2009-113.   Since the

Commissioner’s power to abate interest is discretionary, (1) we

give due deference to that discretion, and (2) in order to

prevail, the taxpayer must prove that the Commissioner exercised

his discretion arbitrarily, capriciously, or without sound basis

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



     4
      Sec. 6404(e) was amended by the Taxpayer Bill of Rights 2,
Pub. L. 104-168, sec. 301, 110 Stat. 1457 (1996), to permit
interest abatement for interest accruing with respect to
deficiencies or payments for tax years beginning after July 30,
1996, arising from ministerial or managerial delays.
                               - 9 -

Our inquiry in this latter regard is a factual one.   See Chakoian

v. Commissioner, T.C. Memo. 2009-151; Boyd v. Commissioner, T.C.

Memo. 2000-16.   And the taxpayer bears the burden of proof.    Rule

142(a).

     To be eligible for relief, the taxpayer must establish a

correlation between the error or delay by the IRS officer or

employee and a specific period for which interest should be

abated as a result of that error or delay.   See Bo v.

Commissioner, T.C. Memo. 2005-150; Palihnich v. Commissioner,

T.C. Memo. 2003-297.   The estate acknowledges that it cannot

point to a specific period for which interest should be abated.

     In Donovan v. Commissioner, T.C. Memo. 2000-220, the

taxpayer failed to identify specific periods for which he

requested an abatement of interest.    We therein declined to order

the requested interest abatement, stating:

     In effect, petitioner is not so much seeking an abatement of
     interest as he is an exemption from it. Characterized in
     that manner, and among other infirmities, the scope of
     petitioner’s request, simply put, is beyond that
     contemplated by the statute, which the Congress did not
     intend would “be used routinely to avoid payment of
     interest”. * * * [Fn. ref. omitted.]

The legislative history of section 6404(e)(1) states:

     This provision 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 the time period.
     Similarly, if a taxpayer files a return but does not pay the
     taxes due, this provision would not permit abatement of this
     interest regardless of how long the IRS took to contact the
     taxpayer and request payment.
                              - 10 -

H. Conf. Rept. 99-426, at 844-845 (1985), 1986-3 C.B. (Vol. 2) 1,

844-845.

     The estate alleges that the IRS created a delay by not being

aggressive (i.e., hounding the estate) in seeking collection of

the estate’s unpaid income tax liability; and, as a consequence,

the estate missed its chance to use the proceeds from the sale of

the real properties to satisfy its outstanding income tax

liability.   Specifically, the estate posits that because the IRS

did not intervene during the sale of the real properties, Ms.

O’Brien, as executrix of the estate, did not realize that there

was an outstanding tax debt that needed to be paid.

     There was no personal follow up by the Commissioner of the
     filing of the Proof of Claim in the Probate Court or the
     mailing of multiple from letters, some unsigned, sent to the
     taxpayer and demanding payment. Had some follow up
     occurred, the Taxpayer, naturally, would have been well
     advised to be represented by her accountant or attorney.
     However, in this context, the Service’s representative would
     have learned of the Taxpayer’s intent to sell property to
     reduce debt which likely would have been converted to a tax
     collection opportunity.

We do not find the estate’s position persuasive.

     The holding in Cannon v. Commissioner, T.C. Memo. 2002-205,

is instructive in resolving this case.   There, the taxpayer

sought abatement of interest with respect to a Federal income tax

liability assessed on the basis of amounts reported on her

original and amended Federal income tax returns.   In Cannon, as

in this case, no audit took place and no notice of deficiency was
                              - 11 -

issued.   In declining to order an abatement of interest, we

relied on the legislative history of the statute.

     The estate has failed to demonstrate that the delay in

payment of the 1994 income tax is the result of anything other

than its own conduct.   The estate has not shown any delay by an

IRS officer or employee.   Indeed, the estate acknowledges in its

brief that an IRS representative contacted it soon after the

estate’s income tax return was filed on May 30, 1996, stating:

     Respondent did not delay at all in contacting the taxpayer.
     Indeed, as stated above, the Respondent filed Amendment No.
     1 of Proof of Claim (dated 03/13/96) on or about July 31,
     1996 citing the 1994 income tax return but not indicating
     when the tax lien arose.

     The record demonstrates that the IRS sent letters to the

estate on seven occasions, beginning as early as August 19, 1996,

reminding the estate of its tax liability and warning that the

estate could be subject to lien or levy actions if there was no

response.   The IRS sent these letters to the estate during and

after the period the estate sold the real properties.   The only

additional action the IRS could have taken at this point would

have been to initiate a collection action (e.g., a levy), and the

initiation of a collection action is not a ministerial activity.

Mathia v. Commissioner, T.C. Memo. 2009-120.

     As we stated in Smith v. Commissioner, T.C. Memo. 2002-1,

the legislative history of section 6404(e)(1) reveals that

section is intended to be used solely in instances where failure
                             - 12 -

to abate interest would be perceived as grossly unfair.   In this

case, we do not perceive respondent’s rejection of the estate’s

requested interest abatement to be grossly unfair.

     To conclude, we find that the interest that accrued on the

estate’s 1994 Federal income tax is not the result of an IRS

officer or employee “being erroneous or dilatory in performing a

ministerial act” and that respondent did not abuse his discretion

in denying the estate’s request for an abatement of interest.

     To reflect the foregoing,


                                        Decision will be entered

                                   for respondent.
