                       T.C. Memo. 2000-123



                      UNITED STATES TAX COURT



         LAURENCE L. AND PATRICIA JACOBS, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent

          JAMES W. AND JANICE A. GEIS, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 18259-98, 1099-99.1   Filed April 10, 2000.



     Laurence L. Jacobs, Patricia Jacobs, James W. Geis, and

Janice A. Geis, pro sese.

     Jordan S. Musen and Michael A. Skeen, for respondent.



                        MEMORANDUM OPINION


     WELLS, Judge:   Respondent determined that petitioners are


1
     These cases (hereinafter referred to as case) were
consolidated for trial, briefing, and opinion.
                                - 2 -

not entitled to an abatement of interest pursuant to section

6404(e)2 relating to their 1983 taxable years.    Petitioners meet

the net worth limitations of section 7430(c)(4)(A)(ii).

     The only issue for decision is whether respondent's refusal

to abate interest for the period of time between April 1, 1985,

and July 8, 1996, was an abuse of discretion.

Background

     Some of the facts have been stipulated for trial pursuant to

Rule 91.    The parties' stipulations are incorporated into this

Memorandum Opinion by reference and, accordingly, are found as

facts in the instant case.    When petitioner Laurence Jacobs filed

his petition, he resided in Newport Beach, California.    When

petitioner Patricia Jacobs filed her petition, she resided in

Huntington Beach, California.    When petitioners James and Janice

Geis filed their petition, they resided in Mission Viejo,

California.

     Petitioners are limited partners in Tummies Ltd. Partnership

(TLP).3    TLP is a limited partnership subject to the provisions


2
     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.
3
     Tummies Ltd. Partnership (TLP) was formed by brothers John
and William Knoke in December 1983 for the purpose of developing
a group of characters, a playboard, and an interactive record
known as the "interactor", all of which are collectively known as
the "Tummies". The partnership's promoters hoped that the
cartoon characters would be licensed for use in children's
                                                   (continued...)
                                 - 3 -

of sections 6221-6234.    In May 1984, respondent selected TLP's

1983 partnership return for examination.    The principal issue

during the examination was the deductibility of research and

development (R&D) costs of $1,885,500 for 1983.

April 1, 1985, Through August 1987

       On April 1, 1985, respondent mailed notices of beginning

administrative proceedings to the individual limited partners of

TLP.    This was the first time that respondent notified the

limited partners in writing that the partnership return for 1983

was under examination.    The first revenue agent to work on the

examination of TLP's 1983 return was Jean Dosil.    Agent Dosil

began gathering research materials and analyzing the R&D issue.

Later, Agent Dosil was reassigned to respondent's Appeals Office,

and by January 1986, the partnership examination was reassigned

to Revenue Agent Fred McBrien.

       Throughout his examination, Agent McBrien dealt with two

representatives of TLP, its tax matters partner, John Knoke,4 and

its attorney, William Reising.    By September 24, 1986, TLP and

respondent executed a Form 872-O, signed by the tax matters

partner and Mr. Reising, which extended the period of limitations


3
 (...continued)
cartoon programs and sold as a three-dimensional toy and game
with a record that could feed off the popularity and recognition
of the cartoon program.
4
     John Knoke is the general partner of TLP and has chief
decision-making responsibility and control over its operation.
                               - 4 -

for TLP's 1983 year indefinitely.   The extension of the period of

limitations could have been terminated if either TLP's tax

matters partner or its attorney had submitted a Form 872-N, but

none was ever submitted.5   The Form 872-O was not terminated

until notices of final partnership administrative adjustment

(FPAA) were issued to the tax matters partner and to the limited

partners.

     During the examination, Agent McBrien experienced

difficulties obtaining from the tax matters partner various legal

and business documents relating to the R&D expenses.   Agent

McBrien also had to make a number of efforts to locate and

compile the limited partners' Schedules K-1, Partner's Share of

Income, Credits, Deductions, Etc.   The Schedules K-1 were needed

to determine the percentage of each limited partner's allocable

loss.   Agent McBrien made at least two trips to the tax matters

partner's house in San Clemente, California, to secure the forms.

It was important to obtain the Schedules K-1 from the tax matters

partner instead of the Fresno Service Center (FSC) in order to

expedite the examination.   Obtaining the forms from Fresno could

take up to three times longer than obtaining copies from the tax

matters partner.   By the close of the examination, Agent McBrien




5
     Had a Form 872-N been submitted, respondent would have been
required to issue a notice of final partnership administrative
adjustment within 90 days of receiving the Form 872-N.
                                 - 5 -

had all the Schedules K-1 for tax year 1983 but was never able to

procure all of the Schedules K-1 for 1984.6

     During the period April 1, 1985, through August 1987, there

was never a time when no work was being done on the TLP file.

Agent McBrien never received any complaints from any of the

limited partners or TLP's representatives regarding the speed of

the examination.   At the conclusion of his examination, Agent

McBrien determined that all R&D losses for tax years 1983 and

1984 should be disallowed, but that no penalties should be

determined.   With an attached cover letter dated March 24, 1987,

Agent McBrien sent Mr. Reising a tentative position paper

proposing to disallow the R&D expenses claimed for 1983.     Agent

McBrien then contacted the tax matters partner and Mr. Reising

about setting a time for a closing conference.    The date of the

closing conference is unknown.    By August or September 1987,

Agent McBrien finished his examination of TLP.    Complete

agreement was not reached and the case was ultimately sent to

Appeals to resolve the remaining disputed issues.




6
     Obtaining the 1984 Schedules K-1 was necessary because the
TLP audit involved a series of transactions straddling the 1983
and 1984 taxable years. It was not prudent to conduct a separate
audit for each of those 2 taxable years because the series of
transactions was part of the larger issue of whether the R&D
expenses were deductible.
                               - 6 -

September 1987 Through November 17, 1991

     Sometime after his last meeting with TLP's representatives,

during August 1987, but before April 1989, Agent McBrien

forwarded the TLP file to respondent's Quality Review branch to

be reviewed for compliance with internal procedures.   The exact

date, or even the approximate date, that Quality Review received

the TLP file is unknown.

     Because TLP is governed by the Tax Equity and Fiscal

Responsibility Act of 1982 (TEFRA), Pub. L. 97-248, 96 Stat. 324,

Quality Review had to perform special compliance checks.    Michael

Lester was assigned to the Quality Review branch during 1989.    As

a TEFRA coordinator, Agent Lester was responsible for reviewing

TEFRA cases to make sure that the administrative steps had been

followed properly.   He was also responsible for preparing the

appropriate 60-day or 150-day letter.   Agent Lester did not

remember the TLP case, nor did he recall when his unit received

the case.   Agent Lester remembered keeping current with his

caseload and did not recall a backlog of cases in Quality Review

when he was there.

     During April 1989, Quality Review returned the TLP case to

Agent McBrien's examination group because the case file did not

have any of the Schedules K-1 needed for processing.   Quality

Review also asked Agent McBrien to look into other substantive

issues and to reexamine whether it was appropriate to impose
                               - 7 -

penalties.   Agent McBrien testified that the examination group

forwarded the Schedules K-1 to Quality Review, and that his group

no longer had possession of the forms after the case was sent to

Quality Review.   During September 1989, the examination group

finished its work and returned the file to Quality Review.    The

record is silent as to what happened with the TLP case from

September 1989, through November 17, 1991.

November 18, 1991, Through July 8, 1996

     On November 18, 1991, the FSC issued the limited partners a

60-day letter for the 1983 tax year proposing to disallow the R&D

losses based upon Agent McBrien's findings.    By letter dated

January 15, 1992, TLP's tax matters partner requested an appeal

of the 60-day letter.

     On March 19, 1992, the case was assigned to Appeals Officer

Beth Thurston to resolve the disputed issues.    She checked the

case into her inventory, verified that the period of limitations

had not expired and that there were sufficient documents in the

file, and reviewed the issues to see if they were sufficiently

developed to be considered by Appeals.

     TLP's first representative during the Appeals process was

Mr. Reising.   Appeals Officer Thurston and Mr. Reising discussed

the issues of the case during a telephone conference on June 9,

1992.   During December 1992, Appeals Officer Thurston mailed an

appointment letter to Mr. Reising.     Mr. Reising was involved with
                                 - 8 -

an unrelated, ongoing trial and, consequently, was not able to

meet with Appeals Officer Thurston until January 1993.   Appeals

Officer Thurston asked Mr. Reising to submit a position paper at

the January meeting.

     Mr. Reising did not submit a position paper at the January

meeting and was prepared to discuss only his belief that the

period of limitations on assessment for tax years 1983 and 1984

had expired.   Appeals Officer Thurston replied by showing Mr.

Reising the Form 870-O with his signature.   Because Mr. Reising

was not prepared to discuss the substantive R&D issue, Appeals

Officer Thurston asked him to submit the position paper by March

1993.   On March 8, 1993, Mr. Reising called Appeals Officer

Thurston to inform her that he would have the position paper

completed that week.   On March 19, 1993, during a telephone call,

Mr. Reising told Appeals Officer Thurston that he was still

working on the position paper.    During May 1993, Appeals Officer

Thurston finally received Mr. Reising's position paper, dated

March 11, 1993.

     Shortly after receiving the position paper, Appeals Officer

Thurston was sent to training for approximately 6 weeks.   The TLP

case was not reassigned to another Appeals Officer while she was

in training.   Appeals Officer Thurston was not able, because of

the training sessions, to respond to Mr. Reising's position paper
                                 - 9 -

until August 12, 1993, when she wrote a letter to Mr. Reising

addressing his arguments.

     After trading several telephone messages, on September 10,

1993, and again on September 16, 1993, Appeals Officer Thurston

and Mr. Reising spoke by telephone.      By that time, discussions

had switched from the substance of the R&D issue to how

individual limited partners would be affected by the R&D loss

disallowance.   Specifically, Mr. Reising was concerned about the

treatment of limited partners who sold their partnership

interests and reported gains after 1983 and 1984.      After the

September 1993 telephone discussions, Appeals Officer Thurston

and Janet Spaulding, an Appeals TEFRA coordinator, worked on

formulating a settlement offer for TLP.      Appeals Officer Thurston

attempted to accommodate Mr. Reising's request that separate

settlements be undertaken for the individual limited partners who

sold their interests; however, she and Appeals Coordinator

Spaulding later determined that separate settlements for those

partners would be impractical.

     From September 17, 1993, through April 21, 1994, Appeals

Officer Thurston was still working with Appeals Coordinator

Spaulding to see if they could address the concerns of limited

partners who wanted a separately computed settlement.      They

discussed the matter with their supervisors but did not prepare

any specific forms or documents.    On April 22, 1994, Appeals
                              - 10 -

Officer Thurston left a message for Mr. Reising.    Mr. Reising

failed to return her call, and on May 5, 1994, Appeals Officer

Thurston sent a fax to Mr. Reising's office.    The fax stated in

pertinent part that "Due to more pressing priorities, I have let

this matter sit on the back burner.    However, now that we have

essentially agreed upon a settlement, I am sure you are as

interested in concluding the matter as I am."    Later that day,

Mr. Reising called Appeals Officer Thurston to let her know that

he was no longer representing TLP and that William Knoke was now

TLP's representative.

     Appeals Officer Thurston called Mr. Knoke requesting that he

forward his power of attorney.   By letter dated May 26, 1994, Mr.

Knoke forwarded the power of attorney and a settlement proposal.

By letter dated August 11, 1994, Appeals Officer Thurston

responded to Mr. Knoke's proposal, setting forth additional terms

and asking for clarification on a few points.    On August 29,

1994, Mr. Knoke sent Appeals Officer Thurston a letter which

stated:   "I am in receipt of your letter of August 11, 1994.     I

have spoken with the General Partner regarding your letter.      We

will agree to all of the terms that you outlined in your letter.

Please proceed with finalizing this case."

     After receiving Mr. Knoke's August 29, 1994, letter, Appeals

Officer Thurston began preparing the paperwork necessary to move

the settlement forward.   From February 1995 until sometime in
                              - 11 -

April 1995, Appeals Officer Thurston, aided by Appeals

Coordinator Spaulding, worked on an Appeals case memorandum and a

TEFRA settlement offer package.    The package included completing

Form 870-P(AD), Form 5402, Appeals settlement memorandum, Form

4605-A, and Form 886-Z(C).   Completing the settlement package was

time consuming.   The amount of time it took to complete the

settlement package was compounded by problems with the networked

computer system and difficulties obtaining computer disks from

the examination group that were necessary to complete the

settlement package.   Appeals Officer Thurston had to also

organize Appeals personnel to perform computations for each of

the 125 to 135 limited partners.

     On May 2, 1995, Appeals Officer Thurston spoke with Mr.

Knoke concerning how the settlement would work for those limited

partners who sold their partnership interests.   Between May and

June 1995, Appeals Officer Thurston completed the TEFRA

settlement package.   On June 30, 1995, Appeals Officer Thurston

submitted the case to her manager, Janet Cole, for approval.   On

July 13, 1995, the Appeals Office forwarded a settlement package

to the FSC.   The transmittal letter instructed the FSC to issue

letters and agreement forms to the TLP partners.

     On August 14, 1995, the FSC mailed settlement letters to the

limited partners.   After issuance of the settlement letters, the

Internal Revenue Service (IRS) waited for responses from the
                               - 12 -

individual limited partners.   If an individual limited partner

chose to accept the settlement, the settlement letter would go to

the Ogden Service Center (OSC), which in turn, would send the

letter to Salt Lake City for an associate chief to sign.    Upon

approval, the letter would then be returned to the OSC for

processing and a copy would be sent to the Appeals Office.

During May 1996, Appeals Officer Thurston worked on preparing

FPAA's for those limited partners who chose not to accept the

settlement offer.   On June 6, 1996, Appeals Officer Thurston

wrote an attachment to the FPAA package providing instruction to

the OSC on how to process the settlement offers.

     On June 10, 1996, Appeals Officer Thurston and Appeals

Office Manager Cole signed and dated a Form 5402, Appeals

Transmittal Memorandum and Supporting Statement, documenting the

Office of Appeals' settlement offer and acknowledging that the

offer had been made to the individual partners of TLP.   The Form

5402 recommended issuance of an FPAA for each limited partner who

had not accepted the settlement by returning a signed Form 870-

P(AD).

     On June 13, 1996, respondent's Appeals Office record section

mailed the FPAA package to the OSC.7




7
     During September 1995, all of the Fresno Service Center work
related to TEFRA partnerships, including TLP, was transferred to
the Ogden Service Center.
                               - 13 -

     On July 8, 1996, respondent mailed an FPAA to petitioners

James and Janice Geis.

     A Form 870-P(AD) was mailed to petitioners Laurence and

Patricia Jacobs on August 14, 1995, but they did not sign the

settlement letter until June 30, 1996.    The OSC received the

Jacobses' settlement letter on July 11, 1996.

     As of the date of the Geises' letter finally determining

that interest would not be abated, the Geises' total interest

liability was $21,298.31 and their assessed interest was $734.77

for tax year 1983.    The Geises have not made any payments of

interest.    As of the date of the Jacobses' letter finally

determining that interest would not be abated, the Jacobses'

total interest liability was $17,629.17 for tax year 1983.     The

Jacobses made the following payments of interest which relate to

the TLP issue:    $10,000 on or around August 6, 1998; $9,231.84 on

or around August 31, 1998; and $300.91 on or around October 7,

1998.

Discussion

        Pursuant to section 6404(e)(1), as it applies to the

instant case,8 the Commissioner may abate part or all of an


8
     Congress amended sec. 6404(e) during 1996 to permit
abatement of interest for any "unreasonable" error and delay in
performing a ministerial "or managerial" act. Taxpayer Bill of
Rights 2 (TBOR 2), Pub. L. 104-168, sec. 301(a)(1) and (2), 110
Stat. 1452, 1457 (1996). That amendment, however, applies only
to tax years beginning after July 30, 1996, and, therefore, does
                                                   (continued...)
                               - 14 -

assessment of interest on any deficiency or payment of tax

(described in section 6212(a)) if either:   (1) Such deficiency

was attributable to an error or delay by a Service official in

performing a ministerial act or (2) any error or delay in such

payment is attributable to a Service official's being erroneous

or dilatory in performing a ministerial act.   See sec.

6404(e)(1).   A taxpayer can obtain relief only if no significant

aspect of the error or delay can be attributed to the taxpayer

involved.   See id.   Section 6404(e) is not intended to be

routinely used to avoid payment of interest; rather, Congress

intended abatement of interest only where failure to do so "would

be widely perceived as grossly unfair."   H. Rept. 99-426, at 844

(1985), 1986-3 C.B. (Vol. 2), 1, 844; S. Rept. 99-313, at 208

(1985), 1986-3 C.B. (Vol. 3), 1, 208.   The Tax Court has

jurisdiction to review for abuse of discretion the Commissioner's

failure to abate interest and may order an abatement.     See sec.

6404(i).

     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.   Sec. 301.6404-2T(b)(1), Temporary


8
 (...continued)
not apply to the instant case.   See TBOR 2 sec. 301(c), 110 Stat.
1457.
                               - 15 -

Proced. & Admin. Regs., 52 Fed. Reg. 30163 (Aug. 13, 1987).9    A

decision concerning the proper application of Federal tax law is

not a ministerial act.    See id.   We proceed to consider whether

respondent's refusal to abate interest in the instant case was an

abuse of discretion.   Our analysis is segmented into the relevant

time periods.

April 1, 1985, Through August 1987

     April 1, 1985, the date respondent mailed notices of

beginning administrative proceedings to the individual limited

partners of TLP, is the point at which respondent first contacted

petitioners in writing with respect to the deficiencies.

Consequently, April 1, 1985, begins the period that may be taken

into account, pursuant to section 6404(e), in deciding whether

interest may be abated.   At trial, Agent McBrien explained that

between April 1, 1985, and September 1987, Agents Dosil and

McBrien spent most of their time considering whether to allow the

R&D expense and whether to determine penalties.    He also

testified that work on the TLP file proceeded at a steady pace as



9
     The final regulations under sec. 6404 were issued on Dec.
18, 1998. The final regulations generally apply to interest
accruing on deficiencies or payments of tax described in sec.
6212(a) for tax years beginning after July 30, 1996. See sec.
301.6404-2(d)(1), Proced. & Admin. Regs. Accordingly, the final
regulations are inapplicable to the instant case, and sec.
301.6404-2T, Temporary Proced. & Admin. Regs., 52 Fed. Reg. 30163
(Aug. 13, 1987), effective for taxable years beginning after Dec.
31, 1978, but before July 30, 1996, does apply. See sec.
301.6404-2T(c), Temporary Proced. & Admin. Regs., supra.
                              - 16 -

they spent time researching and interpreting the proper

application of the law to the TLP case.    Decisions concerning the

proper application of Federal tax law are not ministerial acts.

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

supra.   Because the actions of Agents Dosil and McBrien in

researching and interpreting the proper application of the law

are not ministerial acts, respondent's refusal to abate interest

that accrued while they were taking those actions was not an

abuse of discretion.

     Furthermore, we note the failure of the tax matters partner

and TLP's attorney timely to comply with respondent's requests

for TLP business and legal documents and the limited partners'

Schedules K-1.   Petitioners argue that, because respondent

possessed all of the necessary Schedules K-1, the noncompliant

acts of the tax matters partner should not be the focus of the

inquiry.   The reason Agent McBrien asked for the K-1s, however,

was to expedite the examination process.   The failure to obtain

all of the Schedules K-1 for TLP and the time it took to obtain

the other business and legal documents extended the time

necessary to complete the audit and contributed significantly to

any delay that occurred while the case was in examination.

Accordingly, for the period April 1, 1985, through August 1987,

we hold that it was not an abuse of discretion for respondent to

refuse to abate interest.
                               - 17 -

September 1987 Through November 17, 1991

     The evidentiary record for the period September 1987 through

November 17, 1991, is scant.   Sometime after Agent McBrien's last

meeting with TLP representatives during August 1987, but before

April 1989, Agent McBrien forwarded the TLP case to respondent's

Quality Review branch.    The exact date, or even the approximate

date, that he forwarded the case to Quality Review is unknown.

Because Agent McBrien concluded his last meeting with TLP's tax

matters partner and its attorney during August 1987, it is

reasonable to infer that the TLP case was not forwarded to

Quality Review any earlier than September 1, 1987.       When Agent

Lester was asked at trial about the handling of the TLP case

while it was in Quality Review, Agent Lester was not able to

recall the case at all.   The first evidence in the record

indicating that the TLP case was being considered by Quality

Review was when Quality Review returned the case, during April

1989, to Agent McBrien's examination group because of

deficiencies in the case file and because Quality Review wanted

him to reexamine his recommendation not to determine penalties.

Agent McBrien's examination group eventually resubmitted the TLP

case to Quality Review during September 1989.   Nothing further

about that period is contained in the record.
                              - 18 -

     Of particular relevance to the instant case is section

301.6404-2T(b)(2), Example (3), Temporary Proced. & Admin. Regs.,

supra, which provides the following:

     A taxpayer invested in a tax shelter and reported a loss
     from the tax shelter on the taxpayer's income tax return.
     Internal Revenue Service personnel conducted an extensive
     examination of the tax shelter, and the processing of the
     taxpayer's case was delayed during such examination.
     Because the period of limitations on assessment was about to
     expire, the taxpayer executed a consent to extend the period
     of limitations. The time required to process the taxpayer's
     case was not a result of a delay in performing a ministerial
     act; consequently, interest attributable to this period
     cannot be abated * * *.

Example 3 was neither incorporated into the final regulations nor

cited by respondent in the instant case, although it appears to

be applicable to the instant case.10

     TLP's tax matters partner and its attorney executed a Form

872-O extending the period of limitations indefinitely.     Although

the Form 872-O was never revoked or terminated for the duration

of the examination, review, and appeal of the TLP case, we do not

interpret Example 3 so broadly as to conclude that the parties'

extension of the period of limitations means that respondent

could not commit an error or delay in performing a ministerial

act during that period.   We conclude that, even where an

extension of the period of limitations is granted, there may be

instances where an error or delay by an officer or employee of

the IRS in performing a ministerial act may present a


10
     See supra note 9.
                              - 19 -

circumstance where the Commissioner's determination not to abate

interest is an abuse of discretion.

      When reviewing the Commissioner's determination pursuant to

section 6404, our inquiry is a factual one, and we proceed on a

case-by-case basis.   See Boyd v. Commissioner, T.C. Memo. 2000-

16.   We employ an abuse of discretion standard in reviewing the

Commissioner's determination not to abate interest, and we give

the Commissioner's determination due deference.   See Woodral v.

Commissioner, 112 T.C. 19, 22 (1999).   The Commissioner, however,

does not have complete latitude.   The Court will direct the

Commissioner to abate interest if the Commissioner's exercise of

discretion was arbitrary, capricious, or without sound basis in

fact or law.   Indeed, the Court held that the Commissioner's

discretion was abused in Kincaid v. Commissioner, T.C. Memo.

1999-419, and Douponce v. Commissioner, T.C. Memo. 1999-398.

      The final determination letters in the instant case merely

conclude:   "We did not find any errors or delays that merit

abatement of interest in our review of available records and

other information for the period from 4/15/84 to 11/15/1997."

Other than such cursory language, there is nothing in either the

final determination letters or the testimony and other evidence

that respondent offered at trial describing (1) what respondent

inquired into for the period September 1987 through November 17,

1991, (2) the results of that inquiry, and (3) the basis for
                              - 20 -

respondent's determination not to abate interest.   There may

simply be no record of what happened after the case was sent to

Quality Review and no witness who can explain what happened.    On

the other hand, it is possible that respondent performed an

inquiry yielding useful information but failed to offer that

information to petitioners or to the Court.   In any event, except

for the period April 4, 1989, through September 30, 1989, the

period of time the TLP case was back with Agent McBrien's

examination group, we can only speculate, as respondent does, as

to what happened with the TLP file during the period from

September 1, 1987, through November 17, 1991.

     Because section 6404(e) provides for this Court to review

for abuse of discretion the Commissioner's determination as to

whether interest will be abated, the Court must decide how to

proceed where the basis for the Commissioner's determination has

not been clearly explained either in the final determination

letters or at trial.   In Motor Vehicle Manufacturers Association

of the United States v. State Farm Mut. Auto. Ins. Co., 463 U.S.

29, 49 (1983), the Supreme Court stated that an agency must

cogently explain why it has exercised its discretion in a given

manner.   Similarly, in National Treasury Employees Union v.

Federal Labor Relations Auth., 802 F.2d 843, 845 (6th Cir. 1986)

(citing Ross Express, Inc. v. United States, 529 F.2d 679, 682

(1st Cir. 1976)), the Court of Appeals for the Sixth Circuit
                              - 21 -

stated that "The * * * [agency's] decision must be sufficiently

clear so that a court is not required to speculate as to its

basis."   See also Estate of Gardner v. Commissioner, 82 T.C. 989,

1000 (1984) (quoting Wong Wing Hang v. INS, 360 F.2d 715, 719 (2d

Cir. 1966) ("[A]gency action would be an abuse of discretion 'if

it were made without a rational explanation.'")).

     We are satisfied from the evidence adduced at trial that

during the period April 4, 1989, through September 30, 1989,

i.e., while the case was back with Agent McBrien's examination

group, respondent's actions were not ministerial.   However, as to

the period September 1, 1987, through November 17, 1991

(excepting the period April 4, 1989, through September 30, 1989),

respondent has failed to explain the rationale for respondent's

determination not to abate interest.

     The Commissioner is in the best position to know what

actions were taken by IRS officers and employees during the

period for which petitioners' abatement request was made and

during any subsequent inquiry based upon that request.    If we

were to uphold the Commissioner's determination not to abate

interest where the Commissioner has not clearly explained the

basis for the exercise of that discretion, we would be condoning

a review framework that would encourage the Commissioner to

provide as little information as possible about the handling of

cases during the period of the abatement request and about the
                                - 22 -

inquiry in response to the request.      We do not believe that

Congress had that kind of review process in mind when it enacted

section 6404 and provided this Court jurisdiction in section

6404(i) to review, for abuse of discretion, the Commissioner's

determination not to abate interest.      Accordingly, because

respondent has failed to explain clearly the basis for

respondent's refusal to abate interest for the period September

1, 1987, through April 3, 1989, and the period November 1, 1989,

through November 17, 1991, we hold that it was an abuse of

discretion for respondent to refuse to abate interest for that

period.   For the period April 4, 1989, through September 30,

1989, we uphold respondent's final determination not to abate

interest.

November 18, 1991, Through July 8, 1996

     From November 18, 1991, through the mid-May 1993, there were

no ministerial acts performed by respondent.      On March 19, 1992,

Appeals Officer Thurston began her work resolving the disputed

issues.     Much of her early work with the TLP case depended upon

the cooperation of TLP's representatives in scheduling meetings

and phone conferences as well as providing her with a paper

outlining TLP's position on the substantive issues.      Most of the

delay that occurred during that period of time was due to delay

caused by Mr. Reising.    His tardiness in completing TLP's

position paper was the cause of significant delay.      Accordingly,
                              - 23 -

we uphold respondent's final determination not to abate interest

from November 18, 1991, through mid-May 1993.    By the time

Appeals Officer Thurston received TLP's position paper, she was

set to go to training for approximately 6 weeks--from

approximately mid-May through early July 1993.    The case was not

reassigned to another agent while Appeals Officer Thurston was in

training, and no work was completed on the TLP case.    Pursuant to

section 301.6404-2T(b), Example (4), Temporary Proced. & Admin.

Regs., 52 Fed. Reg. 30163 (Aug. 13, 1987), however, the decision

not to reassign the case while Appeals Officer Thurston was in

training was not a ministerial act.    Accordingly, from mid-May

through early July 1993, the period of time Appeals Officer

Thurston was in training, we uphold respondent's final

determination not to abate interest.

     When Appeals Officer Thurston returned from training she

finished her response to Mr. Reising's position paper.    By that

time, the focus of the appeal switched to how the individual

partners would be treated.   Discussions regarding the treatment

of the individual limited partners continued until September 16,

1993, eventually ending with the understanding that there would

not be individual settlements for each of the limited partners.

Because there were no delays caused by any ministerial acts of

respondent's officers or employees from early July through
                              - 24 -

September 16, 1993, we uphold respondent's final determination

not to abate interest for such period.

     It is apparent from Appeals Officer Thurston's April 22,

1994, facsimile to Mr. Reising, stating she had put the TLP case

"on the back burner", that she was working on non-TLP matters

from September 17, 1993, through April 21, 1994.    Appeals Officer

Thurston was able to work on more pressing matters because the

tax matters partner and TLP's attorney executed a Form 872-O

extending the period of limitations indefinitely.   Though not

precisely on point, section 301.6404-2T(b), Example (5),

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

1987), implies that Appeals Officer Thurston's decision to order

her work affairs based on caseload priorities is not a

ministerial act.   Consequently, we uphold respondent's final

determination not to abate interest from September 17, 1993,

through April 21, 1994.

     From April 22, 1994, forward, we are satisfied that

respondent was working steadily on the TLP case to bring the

matter to a close.   Between April 22 and August 29, 1994, Appeals

Officer Thurston spent her time clarifying the settlement with

TLP's new representative, William Knoke.   After August 29, 1994,

Appeals Officer Thurston prepared the paperwork and performed

other tasks necessary to bring the settlement to a close.   After

the settlement letters (containing Forms 870-P(AD)) were sent to
                              - 25 -

the limited partners on August 14, 1995, it was necessary to wait

several months to see how many partners would accept the offer

before respondent could send FPAA's to the limited partners who

rejected the settlement.   At that point, after the settlement

letters were mailed, the speed at which the matter was to be

closed was up to the partners.    The Geises never signed a Form

870-P(AD), and respondent did not receive the Jacobses' Form 870-

P(AD) until July 11, 1996.   From May until July 1996, when

respondent sent the FPAA's to petitioners, Appeals Officer

Thurston prepared the documents to be included in the FPAA

package.   On the basis of the foregoing, we conclude that there

were no errors or delays in the performance of ministerial acts

by respondent's officers or employees during that period.

Accordingly, we uphold respondent's final determination not to

abate interest from April 22, 1994, through July 8, 1996.

     To reflect the foregoing,


                                      Decisions will be entered

                                 abating interest for the period

                                 of time stated herein.
