                        T.C. Memo. 2008-163



                     UNITED STATES TAX COURT



                 DAWN ERICA GARRITY, Petitioner,
                AND WILLIAM J. GARRITY, Intervenor
                                v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 16379-03.              Filed June 30, 2008.



     Dawn Erica Garrity, pro se.

     William J. Garrity, pro se.

     Luanne S. Di Mauro, for respondent.



                        MEMORANDUM OPINION


     THORNTON, Judge:    On October 31, 2005, the Court entered a

decision in this case pursuant to the parties’ stipulation.   On

November 1, 2006, after the decision had become final,

petitioner and intervenor filed a motion under section 7481(c)
                               - 2 -

and Rule 261 to redetermine interest.1    As discussed below, we

hold that petitioner and intervenor have failed to satisfy the

jurisdictional prerequisites under section 7481(c).

                             Background

     Petitioner and her husband William Joseph Garrity filed

joint Federal income tax returns for 1990, 1991, and    1992.2     On

June 23, 2003, respondent issued two separate but identical

notices of deficiency to petitioner and Mr. Garrity, determining

income tax deficiencies of $111,947, $100,289, and $48,848 for

1990, 1991, and 1992, respectively, and imposing the section

6663(a) fraud penalty with respect to each year.    Petitioner and

Mr. Garrity separately petitioned this Court; Mr. Garrity’s case

was assigned docket No. 16115-03.   Mr. Garrity (sometimes

referred to herein as intervenor) also filed a notice of

intervention in the instant case.   The parties reached

settlements in both cases.   Pursuant to the parties’ agreements,

on October 31, 2005, this Court entered decisions in the instant

case and in docket No. 16115-03.    Pursuant to the decision in the

instant case, petitioner has no deficiency for 1990 or 1991 but

has a $48,848 deficiency for 1992; she is not liable for any



     1
       Unless otherwise indicated, all Rule references are to the
Tax Court Rules of Practice and Procedure, and all section
references are to the Internal Revenue Code of 1986, as amended.
     2
       The 1992 return was untimely filed in 1995 and showed a
tax liability of $44,405.
                              - 3 -

fraud penalty; and for 1992 she is not entitled to relief from

joint and several liability pursuant to section 6015.    The

decision document reflects the parties’ agreement as follows:

          It is hereby stipulated that the Court may enter
     the foregoing decision in this case.

          It is further stipulated that there is an advance
     payment for the taxable year 1992 in the amount of
     $50,000.00 It is stipulated that the deficiency for
     the taxable year 1992 has been computed without
     considering the advance payment in the amount of
     $50,000.00.

          It is further stipulated that interest will be
     assessed as provided by law on the deficiency due from
     petitioner.

          It is further stipulated that, effective upon the
     entry of this decision by the Court, petitioner waives
     the restrictions contained in I.R.C. §6213(a)
     prohibiting assessment and collection of the deficiency
     (plus statutory interest) until the decision of the Tax
     Court becomes final.

          It is further stipulated that the aforesaid
     deficiency, plus interest as provided by law, is a
     duplication of the deficiency set forth in the case of
     William Joseph Garrity v. Commissioner, Docket No.
     16115-03, in which case a decision document is
     concurrently being filed with the United States Tax
     Court.

          It is further stipulated that the payment of the
     entire amount of the deficiency in the amount of
     $48,848.00, plus interest as provided by law, by the
     other party jointly liable therefore,[sic] will
     discharge the instant petitioner from liability.

     Pursuant to the decision at docket No. 16115-03, Mr. Garrity

has deficiencies of $97,953, $100,289, and $48,848 for 1990,

1991, and 1992, respectively; and he is liable for the

section 6663(a) fraud penalty for 1991 and 1992 in the amounts of
                                - 4 -

$75,216.75 and $36,636, respectively.    The decision document

reflects the parties’ agreement, which is substantially identical

to the agreement reflected in the decision document in the

instant case, except that it does not include the final two

paragraphs quoted supra.

     On January 4, 2006, respondent assessed petitioner’s and Mr.

Garrity’s $48,848 deficiency in their 1992 joint account and

assessed $54,004.38 of interest due on the deficiency.

Consistent with the parties’ agreement as reflected in the

decision documents, respondent credited petitioner’s and Mr.

Garrity’s 1992 joint account with a $50,000 advance payment as of

April 10, 2000.    In addition, on February 21, 2006, respondent

credited petitioner’s and Mr. Garrity’s 1992 joint account with a

$915 subsequent payment.

     On February 4, 2006, respondent sent petitioner a Final

Notice of Intent to Levy and Notice of Your Right to a Hearing

with respect to the unpaid portion of the 1992 joint liability.

Respondent also instituted collection proceedings against Mr.

Garrity for taxable years 1990 through 2000, inclusive, as well

as 2002.    Petitioner and Mr. Garrity separately requested

hearings before respondent’s Appeals Office pursuant to section

6330.    Petitioner’s collection case was not resolved in Appeals.3


     3
       The Appeals Office issued petitioner a notice of
determination, dated Jan. 17, 2007, sustaining the proposed
                                                   (continued...)
                                 - 5 -

Mr. Garrity’s collection case, however, was resolved in Appeals

in the manner described below.

     On or about March 14, 2007, Mr. Garrity submitted Form 656,

Offer in Compromise.   The face of the Form 656 indicates that Mr.

Garrity offered to pay $195,200 to compromise his tax liabilities

for tax years 1990 through 2000, inclusive, plus 2002.   Attached

to the Form 656 is a memo, signed by Mr. Garrity and dated March

14, 2007, which states:

     To: Commissioner of the Internal Revenue Service

     I submitted an offer in compromise dated 03/14/07 in
     the amount of $195,200 to compromise unpaid income tax,
     plus Statutory Additions, for Taxable Period(s) 1992.

     The purpose of this letter is to amend and clarify that
     offer by adding the following provision:

     Although the liability sought to be compromised is the
     joint and individual liability of myself and my co-
     obligor(s), I am submitting this offer to compromise my
     individual liability only.

     If this offer is accepted, it does not release or
     discharge my co-obligor(s) from liability. The United
     States still reserves all rights of collection against
     the co-obligor(s).


     Respondent’s settlement officer signed the Form 656 on March

22, 2007, indicating acceptance of Mr. Garrity’s offer in

compromise.   The Form 656 states:   “The IRS will apply payments



     3
      (...continued)
collection action; in docket No. 2927-07L, petitioner has
petitioned this Court for review of this notice of determination.
                                - 6 -

made under the terms of this offer in the best interest of the

government.”

     Mr. Garrity made the $195,200 payment on or about July 24,

2007.    Applying the $195,200 to the tax liabilities with the

oldest assessment dates, respondent applied $153,677.44 of this

amount to Mr. Garrity’s 1999 liability and the remainder to his

1997 liability.4   None of the payments made through Mr. Garrity’s

offer-in-compromise were applied to his 1992 liability.

     In the meantime, on November 1, 2006, petitioner and

intervenor filed with this Court their motion to redetermine

interest under Rule 261 and supplemented the motion on April 20,

2007.    In addition, on December 12, 2006, petitioner and

intervenor filed a motion for leave to file motion to restrain

assessment or collection during the pendency of their motion to

redetermine interest.



     4
       The assessment dates for the tax liabilities compromised
by Mr. Garrity’s offer-in-compromise are as follows:

               Tax Year                 Assessment Date

                 1990                       1/4/2006
                 1991                       1/4/2006
                 1992                       1/4/2006
                 1993                      7/24/2000
                 1994                       7/3/2000
                 1995                      7/24/2000
                 1996                      7/31/2000
                 1997                      6/12/2000
                 1998                      6/19/2000
                 1999                      5/22/2000
                 2000                      4/15/2002
                 2002                     11/24/2003
                                - 7 -

 The parties filed various responses, replies, and supplements to

these motions.   On September 17, 2007, the Court held a hearing

on these motions.

                             Discussion

     In certain limited circumstances the Tax Court has

jurisdiction to reopen a case to redetermine interest after the

decision has become final.    Med James, Inc. v. Commissioner, 121

T.C. 147, 151 (2003).   Section 7481(c) provides, in pertinent

part:

          SEC. 7481(c).   Jurisdiction Over Interest
     Determinations.

               (1) In general.--Notwithstanding subsection
          (a), if, within 1 year after the date the decision
          of the Tax Court becomes final under subsection
          (a) in a case to which this subsection applies,
          the taxpayer files a motion in the Tax Court for a
          redetermination of the amount of interest
          involved, then the Tax Court may reopen the case
          solely to determine whether the taxpayer has made
          an overpayment of such interest or the Secretary
          has made an underpayment of such interest and the
          amount thereof.

               (2) Cases to which this subsection applies.--
          This subsection shall apply where--

                      (A)(i) an assessment has been made by
                 the Secretary under section 6215 which
                 includes interest as imposed by this title,
                 and
                         (ii) the taxpayer has paid the entire
                      amount of the deficiency plus interest
                      claimed by the Secretary, and

                      (B) the Tax Court finds under section
                 6512(b) that the taxpayer has made an
                 overpayment.
                                - 8 -

     Pursuant to this provision, this Court lacks jurisdiction

over a motion to redetermine interest if the taxpayer has not

paid the entire deficiency and the entire amount claimed by the

Commissioner as interest on the redetermined deficiency.     Bax v.

Commissioner, 13 F.3d 54 (2d Cir. 1993); Asciutto v.

Commissioner, T.C. Memo. 1992-564, affd. 26 F.3d 108 (9th Cir.

1994).   Respondent contends that petitioner has not met this

requirement.    Petitioner and intervenor counter that the

requirement has been met because petitioner’s 1992 tax liability

was paid by:    (1) The $50,000 advance payment referenced in the

decision document; and (2) the payment of intervenor’s offer-in-

compromise.

     Petitioner and intervenor appear to contend that because the

$50,000 advance payment exceeded the $48,848 deficiency reflected

in this Court’s decision, petitioner has no remaining tax 1992

liability.5    As expressly acknowledged in the parties’


     5
       At various points in this proceeding petitioner and
intervenor have contended that petitioner’s $48,848 deficiency
should be reduced by the $44,405 tax liability that was reported
on petitioner’s and intervenor’s 1992 joint tax return.
Petitioner and intervenor have not expressly raised this argument
at the hearing or in their posthearing briefs and appear to have
abandoned it; in any event, the argument is without merit.

     On brief, petitioner and intervenor rely upon testimony of
their accountant, who suggested variously that he had expected
that petitioner’s liability would be extinguished by Mr.
Garrity’s offer-in-compromise and that petitioner’s correct 1992
tax liability was $28,182.22. The accountant was unable to say
how he derived this number other than to say “it looks like a
split balance * * * I’m not sure.”   We do not rely upon the
accountant’s vague and conclusory testimony. In any event,
                                                   (continued...)
                               - 9 -

stipulation reflected in the decision document, however,

“interest will be assessed as provided by law on the deficiency

due from petitioner”.   Respondent has assessed $54,004.38 of

interest on the $48,848 redetermined deficiency.   Petitioner and

intervenor dispute the correctness of this interest calculation.6

Pursuant to section 7481(c), however, the threshold question is

not whether respondent correctly calculated the interest but

whether “the deficiency plus interest claimed by the Secretary”

has been paid.   Obviously, the $50,000 advance payment was

insufficient to pay the redetermined deficiency plus interest

claimed.7

     Petitioner and intervenor contend that we should also take

into account the $195,200 that Mr. Garrity paid on or about


     5
      (...continued)
insofar as petitioner and intervenor seek to challenge the amount
of petitioner’s 1992 deficiency as found in this Court’s final,
stipulated decision, such a challenge is not properly made in
this proceeding to redetermine interest.
     6
       Petitioner and intervenor suggest, among other things,
that the assessed interest is excessive because it fails to take
into account that respondent allegedly initially posted the
$50,000 advance payment to the wrong account before posting it,
after a long delay, to petitioner’s and Mr. Garrity’s 1992
account. Petitioner and intervenor also suggest that
respondent’s interest calculation as reflected in respondent’s
490 Activity Summary is invalid as to petitioner because only Mr.
Garrity’s name and Social Security number appear at the top of
the document. As respondent’s settlement officer testified,
however, the 490 Activity Summary reflects respondent’s interest
calculation for petitioner’s and Mr. Garrity’s 1992 joint
account, even though petitioner’s name is not also shown.
     7
       This conclusion is unaltered by the fact that on Feb. 21,
2006, respondent credited petitioner’s and Mr. Garrity’s 1992
joint account with an additional $915 payment.
                              - 10 -

July 24, 2007, pursuant to his offer-in-compromise.    Petitioner

and intervenor suggest that because 1992 was one of the 12 tax

years that were compromised under Mr. Garrity’s offer-in-

compromise, petitioner’s 1992 liability was also extinguished.

As support for their argument they cite the parties’ stipulation

as reflected in the decision document, which states:   “the

payment of the entire amount of the deficiency in the amount of

$48,848.00, plus interest as provided by law, by the other party

jointly liable therefore, [sic] will discharge the instant

petitioner from liability”.

     Mr. Garrity’s offer-in-compromise expressly states, however,

that it was submitted to compromise Mr. Garrity’s “individual

liability only” and did not “release or discharge my co-

obligor(s) from liability.”   Respondent applied Mr. Garrity’s

$195,200 payment to his 1997 and 1999 tax liabilities, on the

basis that these years reflected the oldest assessments with, as

respondent’s settlement officer testified, “the least amount of

time left on the collection statute.”   We find no error in this

action.   Mr. Garrity’s offer-in-compromise expressly states that

respondent may apply his payments under the offer-in-compromise

in respondent’s best interests.   See also Rev. Proc. 2002-26,

sec. 3.03, 2002-1 C.B. 746, 746 (payments made pursuant to the

terms of offers-in-compromise that have been accepted by the

Commissioner in accordance with section 7122, absent an agreement

between the parties, will be applied to periods in the order of
                              - 11 -

priority that the Commissioner determines will serve the

Commissioner’s best interests).   Consequently, the compromise of

Mr. Garrity’s 1992 tax liability has not affected petitioner’s

1992 liability.

     Because petitioner and intervenor have failed to establish

that the entire amount of petitioner’s deficiency and assessed

interest thereon claimed by respondent has been paid as required

under section 7481(c)(2)(A)(ii), we lack jurisdiction to consider

the motion for interest redetermination.

     In addition, we will deny petitioner’s and intervenor’s

motion for leave to file motion to restrain assessment or

collection.   Section 7421(a) broadly prohibits suits to restrain

assessment or collection:   “no suit for the purpose of

restraining the assessment or collection of any tax shall be

maintained in any court by any person, whether or not such person

is the person against whom such tax was assessed.”   Although

section 7421(a) enumerates exceptions to this general rule,

petitioner and intervenor have not demonstrated that any of these

exceptions applies.   In particular, the restrictions on

assessment and collection applicable to deficiencies, as provided

in section 6213(a) and cross-referenced in section 7421(a), apply

only “until the decision of the Tax Court has become final.”
                              - 12 -

Once its decision becomes final, the Tax Court’s authority under

section 6213(a) to enjoin collection activity ends.8

     Our task under section 7481(c) is to determine whether

interest has been overpaid.   If it has, this Court is vested

specifically with jurisdiction to order the overpayment refunded.

See section 7481(c)(3), with its cross-reference to section

6512(b)(1).   Conspicuously absent is any explicit grant of

authority to restrain collection, and indeed authority of that

kind would seem out of place in the context of a statute

confined, as is section 7481(c), to the adjudication of

overpayments.   Nor would this Court have jurisdiction to restrain

collection as an ancillary matter, for as previously discussed we

lack jurisdiction over the section 7481(c) motion itself.




     8
       Moreover, as reflected in the decision document,
petitioner stipulated that “effective upon the entry of this
decision by the Court, petitioner waives the restrictions
contained in I.R.C. §6213(a) prohibiting assessment and
collection of the deficiency (plus statutory interest) until the
decision of the Tax Court becomes final”.

     On brief petitioner and intervenor appear for the first time
to request abatement of interest. Generally, we do not consider
issues raised for the first time on brief where, as here,
surprise and prejudice are found to exist. See Sundstrand Corp.
& Subs. v. Commissioner, 96 T.C. 226, 346-347 (1991); Seligman v.
Commissioner, 84 T.C. 191, 198 (1985), affd. 796 F.2d 116 (5th
Cir. 1986). In any event, petitioner and intervenor have not met
the jurisdictional prerequisites for bringing an action for
review of failure to abate interest, inasmuch as there is no
evidence that respondent issued a notice of final determination
under sec. 6404, and no corresponding Tax Court petition has been
filed for review of respondent’s failure to abate interest.
                        - 13 -

To reflect the foregoing,


                                  An appropriate order will

                             be entered.
