                        T.C. Memo. 2008-55



                      UNITED STATES TAX COURT



           ANGELO N. AND JO E. GRANDELLI, Petitioners v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11445-04.              Filed March 6, 2008.



     Angelo N. and Jo E. Grandelli, pro sese.

     Jack T. Anagnostis and Stuart Spielman, for respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION


     GOEKE, Judge:   This case is before the Court upon

respondent’s determination that petitioners are not entitled to

an abatement of interest.   We decide whether respondent’s refusal

to abate interest is an abuse of discretion.    See sec. 6404(h)1.


     1
         All section references are to the Internal Revenue Code,
                                                    (continued...)
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We hold that respondent did not abuse his discretion under

section 6404(e) in denying petitioners’ request for abatement of

interest that accrued on their income tax liability for tax year

1997.

                         FINDINGS OF FACT

     At the time they filed their petition, petitioners resided

in Drexel Hill, Pennsylvania.

     Petitioners mailed a Form 1040, U.S. Individual Income Tax

Return, for 1996 in August of 1997, and then again in September

of 1997.   Petitioners also mailed a Form 1040X, Amended U.S.

Individual Income Tax Return, in September of 1997.   On the

amended Form 1040X for 1996, petitioners claimed an overpayment

of $1,160, which they requested to be credited to their 1997 tax

liability.

     The Internal Revenue Service (IRS) did not receive any of

these returns.   It is not clear from the record whether the IRS’

failure to receive these returns was due to either party’s error.

In January or February of 1998, the IRS notified petitioners that

it had not received an income tax return from them for 1996.

Petitioners sent the IRS a package that they believe contained

both an original and an amended income tax return, but the IRS




     1
      (...continued)
and all Rule references are to the Tax Court Rules of Practice
and Procedure.
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afterwards informed them that it had received only an original

Form 1040 income tax return for 1996 on March 13, 1998.

     In July of 1998, petitioners prepared and mailed a Form 1040

for 1997.   On this return, petitioners noted that they had

requested the $1,160 from their amended 1996 income tax return be

applied to their 1997 tax liability.   The IRS did not receive

this return.

     On August 16, 1999, the IRS issued a notice of income tax

delinquency (notice of delinquency) for 1997 to petitioner Jo

Grandelli individually under her maiden name and to an address

where petitioners had not resided since before they filed their

1996 return.   Petitioners did not receive this notice of

delinquency.

     On March 9, 2002, the IRS issued a Letter 1058, Notice of

Intent to Levy and Notice of Your Right to a Hearing, to Mrs.

Grandelli under her maiden name at petitioners’ correct address,

which was the address provided on petitioners’ 1996 return that

the IRS received.   The notice was of intent to levy to collect an

assessment of a deficiency on Mrs. Grandelli’s individual account

for 1997.

     Petitioners learned through correspondence with the IRS that

it had not received their amended 1996 return or any return for

1997.   Petitioners mailed a copy of their amended 1996 return to

the IRS’s Taxpayer Advocate Service in Philadelphia on May 3,
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2002, and filed their 1997 return with the IRS on May 6, 2002.

The IRS has no record of an amended return being filed for 1996,

and the $1,160 overpayment shown on petitioners’ amended 1996

return was never credited toward petitioners’ 1997 tax liability.

     On May 30, 2003, the IRS issued separate but identical

notices of intent to levy to Mr. and Mrs. Grandelli at their

correct address.   The tax assessed was based upon petitioners’

1997 joint return.   Petitioners concede that the assessed balance

of tax due on the May 30, 2003, notices of intent to levy is

correct.   The erroneous assessment against Mrs. Grandelli

individually has been abated, and the assessment on the May 30,

2003, notices of intent to levy is the underlying liability upon

which interest and penalties have accumulated.

     Petitioners submitted a request for abatement of interest

and penalties for 1997 by letter dated September 13, 2003, which

respondent received on October 16, 2003.   Petitioners claimed

that they were entitled to relief under section 6404(e) because

the IRS did not notify them in a timely manner that it had not

received their 1997 return.   Petitioners also stated that they

should not be penalized for the fact that the IRS did not receive

their amended 1996 return, which showed a refund to be credited

toward their 1997 liability, because they had a reasonable

expectation that the IRS would receive the returns that they

mailed.
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     Respondent denied petitioners’ request for abatement of

interest in a letter dated March 30, 2004.     Respondent stated,

among other things, that no errors or delays were found that

merited the abatement of interest.

     Petitioners timely petitioned this Court to review

respondent’s denial of their request for abatement of interest.

                                 OPINION

     Section 6404(e)(1) provides that the Commissioner may abate

part or all of an assessment of interest on any deficiency or

payment of income taxes to the extent that the deficiency or any

error or delay in payment is attributable to unreasonable error

or delay by an officer or employee of the IRS in performing a

ministerial or managerial act.     Such an error or delay is taken

into account only if it is in no significant aspect attributable

to the taxpayers and only if it occurs after the IRS has

contacted the taxpayers in writing with respect to the deficiency

or payment.   Sec. 6404(e)(1).    Even if there is an error or

delay, the Commissioner has discretion whether to abate interest.

Mekulsia v. Commissioner, T.C. Memo. 2003-138, affd. 389 F.3d 601

(6th Cir. 2004).   Section 6404(e) is intended to apply only “in

instances where failure to abate interest would be widely

perceived as grossly unfair.”     H. Rept. 99-426, at 844 (1985),

1986-3 C.B. (Vol. 2) 1, 844.
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     We have jurisdiction to determine whether the Commissioner’s

decision not to abate interest was an abuse of discretion.      Sec.

6404(h)(1).    In order to prevail, the taxpayers must prove that

the Commissioner abused his discretion by exercising this

discretion arbitrarily, capriciously, or without sound basis in

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

Thus, the taxpayers bear the burden of proof.    Rule 142(a).

     Petitioners argue that the delay in their payment of their

1997 tax liability is attributable to the IRS’s unreasonable

error in sending the notice of delinquency to Mrs. Grandelli

under an incorrect name and to an incorrect address and the IRS’s

unreasonable delay in sending the notice of delinquency to

petitioners’ correct address.   Petitioners argue that they

reasonably believed that their refund for 1996, as shown on their

amended 1996 return, would satisfy their 1997 tax liability.     Had

they learned earlier that the IRS had not received either their

amended 1996 return or their original 1997 return, petitioners

might have been able to mail those returns again and receive

credit for their $1,160 overpayment in 1996 and avoid paying

several years’ worth of interest.

     Respondent argues that he did not abuse his discretion, for

two reasons.   First, respondent argues that the first time that

the IRS contacted petitioners in writing with respect to a

deficiency or payment was on March 9, 2002, when the IRS issued
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the Letter 1058 to Mrs. Grandelli.      Therefore, to establish that

they are entitled to relief, petitioners must prove that an

officer or employee of the IRS made some error or delay after the

date of this first contact.    Sec. 6404(e)(1); Nerad v.

Commissioner, T.C. Memo. 1999-376.      However, the errors and

delays that petitioners claim caused their delay in payment

occurred before this date.    Respondent argues that the notice of

delinquency mailed to Mrs. Grandelli on August 16, 1999, did not

constitute written contact with respect to either a deficiency or

a payment within the meaning of section 6404(e)(1) because it was

intended to inform petitioners that they had not filed a return

for 1997, not to inform them that there was a deficiency or a

payment owed for 1997.

       Second, even if we were to find that the notice of

delinquency did constitute the type of written contact required

by section 6404(e)(1), respondent argues that petitioners’ delay

in paying their 1997 tax liability would not be attributable to

any unreasonable error or delay by any employee or officer of the

IRS.

       We have not directly addressed the issue of whether a notice

of delinquency, which generally only notifies the taxpayers that

they have not filed a return for a specific year, constitutes a

written contact “with respect to [a] deficiency or payment.”      See

Weiss v. Commissioner, T.C. Memo. 1999-364 (finding it
                               - 8 -

unnecessary to decide whether the Commissioner’s request for a

copy of the taxpayer’s return was a “writing with respect to [a]

deficiency or payment” within the meaning of section 6404(e)).

However, we need not decide this issue now because even if we

were to find that the August 16, 1999, notice of delinquency did

constitute such a written contact, we would still find that the

delay in petitioners’ payment was attributable to their error in

making payment and not to an error or delay by the IRS.

     The IRS did err by mailing a notice of delinquency to Mrs.

Grandelli under an incorrect name and to an incorrect address.

However, we find that the cause of petitioners’ delay in paying

their 1997 income tax liability was their failure to timely file

their amended 1996 income tax return and their 1997 income tax

return.   Petitioners knew that the IRS did not receive the three

1996 income tax returns they mailed in 1997.   When the IRS

notified them in 1998 that it had not received any of their

income tax returns for 1996, petitioners should have realized

that there was a problem with their method of filing income tax

returns and taken steps to correct this problem or at least

established a policy of verifying that the IRS received their

subsequent returns.

     While it is the IRS’s policy to notify taxpayers when they

have not timely filed returns, the IRS has no statutory

obligation to do so.   See 2 Administration, Internal Revenue
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Manual (CCH), pt. 5.19.2., at 18,303 (Apr. 1, 2007).    Given their

past problems with filing income tax returns, petitioners should

not have relied on the IRS to notify them that their 1996 amended

return and their 1997 return had not been received.    If the IRS

had not sent petitioners any notification that their 1997 return

was delinquent before 2002, this would not be an unreasonable

error or delay under section 6404(e) because that section does

not permit abatement of interest regardless of how long the IRS

takes to first contact the taxpayer.     Downing v. Commissioner,

118 T.C. 22, 30-31 (2002); Cannon v. Commissioner, T.C. Memo.

2002-205; Hanks v. Commissioner, T.C. Memo. 2001-319.     Therefore,

we find it was petitioners’ error that ultimately caused the

delay in petitioners’ payment of their 1997 income tax

liabilities.

     We agree with petitioners that they generally have a

reasonable expectation that items they send in the mail will be

received.   However, because petitioners were aware that several

of the returns they mailed to the IRS were not received,

petitioners should have taken steps to ensure that the IRS

received their subsequent returns.     Furthermore, petitioners have

not offered any evidence showing that the IRS’s failure to

receive petitioners’ amended 1996 return or 1997 return before

2002 was due to any error committed by the IRS.    Because

petitioners bear the burden of proof, the absence of any evidence
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as to what happened to the missing returns weighs in favor of

respondent.

     Consequently, petitioners are not entitled to an abatement

of interest under section 6404(e) with respect to their 1997

income tax.   It follows that respondent’s failure to abate such

interest is not an abuse of discretion.

     To reflect the foregoing,


                                          Decision will be entered

                                    for respondent.
