                        T.C. Memo. 2010-275



                      UNITED STATES TAX COURT



 SAMIR H. ABUMAYYALEH AND ZUHRA R. ABUMAYYALEH, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 26102-07.              Filed December 14, 2010.



     Mark A. Pridgeon, for petitioners.

     James L. Gessford, for respondent.



                        MEMORANDUM OPINION


     MORRISON, Judge:   Respondent IRS audited the 1993, 1994, and

1995 income-tax returns of petitioners Samir and Zuhra

Abumayyaleh.   The revenue agent concluded that the Abumayyalehs

owed more tax than they had reported on their tax returns.   The

IRS provided the Abumayyalehs an administrative appeal.   The IRS

Appeals officer also concluded that the Abumayyalehs owed the
                                - 2 -

additional tax.    Both the audit and the appeal processes were

lengthy.    Eventually, the Abumayyalehs settled their tax

liabilities with the IRS.    The IRS assessed the agreed additional

tax and also assessed interest on the unpaid tax liabilities.

     The Abumayyalehs made an administrative request for

abatement of a portion of the interest on the ground that the IRS

did not perform any significant work on the audit and appeal

during specified periods.    The parties have submitted this case

under Rule 122 for decision upon stipulated facts instead of a

trial.    We adopt their stipulations.1

                              Background

1.   June 9 Through September 7, 1995:     The Audit Begins.

     The Abumayyalehs do not request interest abatement for this

period.    We describe the events of this period anyway in order to

give a complete background.

     On June 9, 1995, IRS Revenue Agent Sally Crandall mailed the

Abumayyalehs a letter stating that their 1992 return had been

assigned to her for audit.    The letter scheduled an interview

with them for June 29, 1995.    It asked them to bring several

documents, including bank statements covering the period from




     1
      Except as otherwise indicated, all section references are
to the Internal Revenue Code as in effect with respect to the
interest assessments to which this case relates. All Rule
references are to the Tax Court Rules of Practice and Procedure.
                                - 3 -

December 1991 to January 1993 and copies of their 1993 and 1994

returns.    The Abumayyalehs attended the interview.

     On July 19, 1995, Agent Crandall prepared a workpaper

analyzing bank deposits by Cup Foods, Inc., Mr. Abumayyaleh’s

S corporation.    (S corporation owners must include their

proportionate shares of the S corporation’s income in their own

income.    A bank-deposit analysis is a common way to determine

whether a taxpayer may have unreported income.    See United States

v. Boulet, 577 F.2d 1165, 1167 (5th Cir. 1978).)    On August 19,

2005, Agent Crandall prepared another workpaper, which described

the ownership and management of Cup Foods.

2.   September 8, 1995, Through April 17, 1996: The First Period
     for Which the Abumayyalehs Request Interest Abatement

     The Abumayyalehs allege that from September 8, 1995, through

April 17, 1996, Agent Crandall “performed no significant work”.

They request interest abatement for this period.2      For September

8 through October 24, 1995, nothing in the record shows that the

IRS performed any significant work on the audit.


     2
      The Abumayyalehs do not distinguish interest on their 1993
taxes, interest on their 1994 taxes, and interest on their 1995
taxes with respect to each of the periods for which they request
abatement. The IRS employees on their case apparently worked on
the three years together as a single project, which started as an
audit of 1992 but expanded later to include 1993 and 1994, then
1995. Thus, it appears that the delays at issue likely did not
affect administrative proceedings for just one or two of the tax
years, but all of them together. Therefore, we construe each of
the Abumayyalehs’ abatement requests to apply to interest that
accrued on their 1993, 1994, and 1995 taxes over the period for
which abatement is requested.
                                 - 4 -

     On October 25, 1995, Agent Crandall, or another IRS agent at

her direction, generated “Currency Banking and Retrieval System”

reports that related to Mr. Abumayyaleh and Cup Foods.     These

reports appear to be summaries of records of certain transactions

involving large amounts of money.     Also on October 25, 1995,

Agent Crandall issued Mr. Abumayyaleh two information document

requests, or IDRs.     The first IDR was for copies of his insurance

policies.     The second IDR requested an explanation of a business

known as “Check Stop”.     Each IDR stated that it related to the

tax year 1992.     The due dates on the IDRs were November 7 and 8,

1995, respectively.     It was about then, we infer, that Agent

Crandall prepared a workpaper describing Mr. Abumayyaleh’s

responses to the insurance-policy IDR.     We do not know whether

Mr. Abumayyaleh responded to the Check Stop IDR.

         For the period from November 9, 1995, through April 17,

1996, the record is silent as to whether the IRS performed any

significant work on the audit.

     In summary, the stipulated facts and exhibits show that the

September 8, 1995, through April 17, 1996, period includes some

significant work by IRS auditors, refuting the Abumayyalehs’

assertion that it did not include any.3


     3
      We observe that as of the end of the period, the IRS may
not have “contacted the taxpayer in writing with respect to” a
payment (or deficiency) for 1993, 1994 or 1995, as sec.
6404(e)(1) would require for interest abatement: the IRS
                                                   (continued...)
                               - 5 -

3.   April 18, 1996:   A Day in the Audit

     The record before the Court does not indicate what may have

happened on this day, but the Abumayyalehs do not request

interest abatement for this day.

4.   April 19, 1996, Through February 13, 1997: The Second
     Period for Which the Abumayyalehs Request Interest Abatement

     The Abumayyalehs allege that from April 19, 1996, through

February 13, 1997, Agent Crandall “performed no significant

work”.   They request interest abatement for this period.

     On April 24, 1996, Agent Crandall, or another IRS employee

at her direction, generated “Information Returns Processing

summary sheets” relating to Mr. Abumayyaleh for tax years 1992

through 1994.   These documents are summaries of certain

information returns about Mr. Abumayyaleh received from third

parties.

     On April 26, 1996, Agent Crandall mailed the Abumayyalehs a

notice that she was expanding the audit to cover their 1993 and

1994 tax returns.   This letter asked them to bring their 1995

return to an appointment which would be scheduled.   (The record

before us indicates that the IRS later extended the audit to the



     3
      (...continued)
apparently only later informed the Abumayyalehs that their
returns for those years were coming under audit. But we need not
decide the issue, which the IRS does not address, because we deny
interest abatement on the ground that no delay has been
established to be due to an error or delay in a ministerial act.
                                - 6 -

1995 tax return.    The IRS issued a 30-day letter on September 6,

1997, proposing an adjustment for 1995.)

     About May 1996, Agent Crandall, or another IRS agent at her

direction, summoned from TCF Bank records of deposits made and

checks drawn by Mr. Abumayyaleh.    In order to respond to the

summons, a clerk at the bank issued an internal request bearing

the date May 28, 1996, for the records.    (We infer from the date

of the request that the IRS issued the summons about May 1996.)

     From June 1996 to October 2, 1996, the record is silent as

to whether the IRS performed any significant work on the audit.

     On October 3, 1996, Agent Crandall conducted a bank-deposit

analysis of the TCF Bank account for 1993.4   Also on this date

she issued Mr. Abumayyaleh two IDRs asking about transfers of

funds among three bank accounts, and another IDR requesting

documents relating to a property transaction.

     On November 19, 1996, Agent Crandall asked her supervisor in

writing for permission to ask the Abumayyalehs to extend the

periods of limitation on assessment for tax years 1992 and 1993.

(The purpose of such an agreement is often to give the IRS

additional time to determine the correct tax before the IRS must

finalize its determination or lose the ability to collect any

tax.)    The parties agreed to extend the periods of limitation.


     4
      The stipulation erroneously says this analysis occurred in
2003, but it is obvious from the relevant exhibits incorporated
into the stipulation that the year is 1993.
                               - 7 -

The audit continued, without issuance of a deficiency notice,

past the date Agent Crandall identified on the request as the end

of the original period of limitation.

     For the period December 1996 through January 1997 the

stipulated facts and exhibits do not show that the IRS performed

any significant work on the audit.

     On February 3, 1997, the IRS received a tip from a third

party suggesting that Mr. Abumayyaleh might have unreported

income.

     On February 12, 1997, Agent Crandall prepared a “Comparative

Balance Sheet & Income Statement” for Cup Foods.   This document

consists of a series of tables and graphs comparing Cup Foods’

financial status from year to year.5

     In conclusion, the second period contains instances of

significant IRS audit activity.

5.   February 14 Through November 11, 1997: The Audit Concludes,
     and the Abumayyalehs Request an Administrative Appeal.

     The Abumayyalehs do not request interest abatement for this

period.   We describe the events of this period anyway in order to

give a complete background.

     On September 6, 1997, Agent Crandall mailed the Abumayyalehs

a notice of proposed deficiencies and penalties for their 1993,



     5
      The record before the Court does not indicate whether the
amounts shown had been determined through investigation or simply
provided by the Abumayyalehs.
                                 - 8 -

1994, and 1995 tax years.   Such a notice is known as a “30-day

letter” because it requests a response within 30 days.     A

response can lead to administrative review at the IRS Appeals

Office.

     On November 11, 1997, the Abumayyalehs mailed Agent Crandall

a letter stating that they disagreed with her determinations and

requesting a conference before the IRS Appeals office.     We refer

to this letter as the protest.

6.   November 12, 1997, Through September 28, 1998: The Third
     Period for Which the Abumayyalehs Request Interest Abatement

     The Abumayyalehs allege that from November 12, 1997, through

September 28, 1998, “no significant work took place”.     They

request interest abatement for this period.

     At some time between September 6, 1997, the date she mailed

the 30-day letter, and November 18, 1997, the date on which the

IRS received the Abumayyalehs’ protest, Agent Crandall moved from

the IRS’s St. Paul office to its Seattle office.   As a

consequence, the Abumayyalehs’ audit was transferred to Revenue

Agent Shawn Erickson.   Agent Crandall prepared what the parties

describe as a “response” to the protest and faxed the response to

Agent Erickson for him to complete the response and send it to

Appeals.   We infer from the heavily redacted “Report Transmittal”

form letter that Agent Erickson subsequently sent to Appeals that

the response was a discussion of the auditors’ basis for their

proposed adjustments.   Agent Crandall faxed the response to Agent
                                 - 9 -

Erickson on December 30, 1997.    Agent Crandall wrote on the fax

cover sheet: “I apologize for the delay--misplaced the mail--I

put it in wrong box.”

     By January 8, 1998, the Appeals Office had received the

Abumayyalehs’ case file, including Agent Erickson’s transmittal

letter, and had assigned the Abumayyalehs’ case to Appeals

Officer Sandra Williams.   Appeals Officer Williams conducted a

“preliminary review” of the case on January 12, 1998.    On or

about January 21, 1998, she mailed the Abumayyalehs a letter

stating that their case had been referred to Appeals as

requested, that because her inventory of cases was “so large” she

would not be able to consider theirs right away but would start

their case and contact them “as soon as I can”, and that they

could write to or call her at the address on the letter.    On

January 22, 1998, she conducted a “preliminary review” of a

related case she had received involving Cup Foods.

     The IRS Appeals Office appears not to have done any work on

the Abumayyalehs’ case from January 22 through September 1, 1998.

On September 2, 1998, Appeals Officer Williams performed four

hours of “analysis” of the case.    (Some of the entries in her

log, including the entries that document these four hours of

work, are terse, but we see no reason to question them.)

     In conclusion, the third period contains instances of

significant IRS audit activity.
                               - 10 -

7.   September 29, 1998, Through June 1999: The IRS Actively
     Works on the Abumayyalehs’ Administrative Appeal.

     The Abumayyalehs do not request interest abatement for this

period.   We describe the events of this period anyway in order to

give a complete background.

     On September 29, 1998, Appeals Officer Williams mailed a

letter to the lawyer for the Abumayyalehs requesting their

consent to extend the periods of limitation on assessment for tax

years 1993 through 1995 to December 31, 1999.   On October 9,

1998, the Abumayyalehs mailed the signed consent form back to the

Appeals officer.   She received it on October 13, 1998, and sent

the lawyer back a copy on or about October 14, 1998.

     Appeals Officer Williams performed about 25 hours of work on

the Abumayyalehs’ case during the three-month period of November

1998 through January 1999.    Some of this work was preparing for

and participating in a teleconference with their lawyer.

     Appeals Officer Williams’ work on the case from March 1

through May 31, 1999, consisted of four telephone calls to

request information from the Abumayyalehs’ accountant.   On or

about June 24, 1999, the lawyer for the Abumayyalehs provided the

requested information in a letter that is four pages long and has

five pages of attachments.    In the letter, the lawyer explained

that the information provided is “a result of some fairly lengthy

discussions with my client and his accountant”.   The IRS received

the letter on June 28, 1999.
                               - 11 -

8.   July Through September 1999: The Fourth Period for Which
     the Abumayyalehs Request Interest Abatement

     The Abumayyalehs allege that from July through September

1999 the Appeals Office “performed no significant work”.    They

request interest abatement for this period.

     On July 25, 1999, Appeals Officer Williams spent eight hours

considering the letter from the Abumayyalehs’ lawyer.   The record

does not show any other significant work on the appeal during

this period.    This is the last period for which the Abumayyalehs

request abatement.

     In conclusion, the fourth period contains instances of

significant IRS audit activity.

9.   Epilogue

     The Abumayyalehs do not request interest abatement for any

of the following periods.

     a.    The Administrative Appeal Concludes.

     Appeals Officer Williams spent several hours in each of the

next several months discussing the case with the Abumayyalehs’

lawyer.   On June 22, 2000, the IRS issued the Abumayyalehs a

deficiency notice for their 1993, 1994, and 1995 taxes.

     b.    The Parties Settle Their Underlying Tax Dispute.

     The Abumayyalehs petitioned the Tax Court for

redetermination of their deficiencies.   They and the IRS settled

that case through a stipulated decision on June 13, 2001.     On

September 3, 2001, the IRS assessed, for each of the years at
                              - 12 -

issue, the agreed amount of tax, the agreed amount of penalties,

and interest computed to June 29, 2001.

     c.   The Abumayyalehs Request Interest Abatement From the
          IRS and Then the Tax Court.

     On May 13, 2004, the Abumayyalehs requested that the IRS

abate interest for their 1993, 1994, and 1995 tax years

attributable to the four periods alleged above and for two

additional periods for which they now concede interest abatement

is not warranted.   The reason they gave for their request was:

     We believe that this record [i.e., the IRS’s alleged
     delays] reflects many ministerial decisions by the
     Internal Revenue Service that lead [sic] to an overly
     lengthy audit process and materially contributed the
     [sic] interest that accrued in this case. Therefore,
     abatement of the interest for the following periods
     [the periods described above] is requested[.]

The Abumayyalehs did not, however, identify any of these “many

ministerial decisions”.   As discussed later, their reasoning

seems to be that inactivity as such is equivalent to ongoing

error or delay in performing a ministerial act.

     On May 11, 2007, the IRS issued a notice of determination

denying the interest-abatement request on the ground that the IRS

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

abatement of interest” for any of the periods.

     The Abumayyalehs timely filed a Tax Court petition for

review of the interest-abatement determination.   They lived in

Minnesota at the time.
                              - 13 -

                            Discussion

     The parties agree that section 6404(e)(1) contains the

standard which the IRS should have used in making its interest-

abatement determination.   It provides:

     In the case of any assessment of interest on--

               (A) any deficiency attributable in whole or
          in part 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, or

               (B) any payment of any tax described in
          section 6212(a) [which includes income tax] 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,

     the Secretary may abate the assessment of all or any
     part of such interest for any period. For purposes of
     the preceding sentence, an error or delay shall be
     taken into account 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 writing with respect to such
     deficiency or payment.

The parties do not express a view as to whether the errors and

delays that the Abumayyalehs allege should be evaluated under

subparagraph (A) or (B) or both.   Both subparagraphs require that

there be an error, or delay, by the IRS in performing a

“ministerial act”.   Because the Abumayyalehs have not asserted

and proven that there was any specific period over which the IRS

permitted interest to accumulate by erring or delaying, we need
                             - 14 -

not decide whether it is subparagraph (A) or subparagraph (B)

that applies.6

     Section 6404(h)(1) provides:

     The Tax Court shall have jurisdiction over any action
     brought by a taxpayer who meets the requirements
     referred to in section 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.[7]

We abate interest under section 6404(h)(1) only if the IRS’s

determination not to abate it was an abuse of discretion.   See

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

     As we discussed earlier, the Abumayyalehs allege that during

each of the four periods for which they request abatement the IRS

“performed no significant work”.    The parties stipulated that

there were instances of IRS work during each period.    We conclude

that these instances of work are significant.    Therefore, we have




     6
      The IRS asserts that the Abumayyalehs caused some delays by
not promptly providing information it requested and by not having
maintained satisfactory records. We need not consider this
assertion because we deny interest abatement on the alternate
ground that the Abumayyalehs have not proven their allegations of
delay.
     7
      The Abumayyalehs meet “the requirements referred to in
section 7430(c)(4)(A)(ii)”--which, for individuals, is a
net-worth limit--and filed the petition timely.
                             - 15 -

fully considered, and rejected, the Abumayyalehs’ factual

contentions.8

     The Abumayyalehs argue that the alleged absence of

significant IRS work during each of these four periods should be

treated as equivalent to an error or delay in a ministerial act.9




     8
      We recognize that a taxpayer could have difficulty in
determining the extent, if any, to which an apparent delay is
actually attributable to “behind-the-scenes” work by the IRS.
See Jacobs v. Commissioner, T.C. Memo. 2000-123. But the
Abumayyalehs did not contend, in the alternative, that we should
abate interest for parts of the periods of alleged delay in which
the IRS has not shown continual work on their case.
Consequently, the IRS has not been put on notice that it would
have to show continual work (or justified delays), rather than
just examples of work, in order to rebut the Abumayyalehs’
allegations. Moreover, nothing in the record indicates that the
IRS hindered the Abumayyalehs in obtaining meaningful judicial
review of its interest-abatement determination by failing to
answer questions about what it had been doing or of why it had
not been doing anything for any period. The Abumayyalehs may
simply not have asked.
     9
      The Abumayyalehs’ legal argument relies on the regulation
defining the statutory phrase “ministerial act”, and, in the
alternative, challenges the validity of the regulation. See sec.
301.6404-2T(b)(1), Temporary Proced. & Admin. Regs., 52 Fed. Reg.
30163 (Aug. 13, 1987).
                             - 16 -

Because we have for each period rejected the premise that the IRS

“performed no significant work”, the Abumayyalehs’ legal argument

is moot, and we decline to consider its merits.10

     To reflect the foregoing,


                                      Decision will be entered for

                                 respondent.




     10
      The Abumayyalehs do not claim that Agent Crandall’s late-
1997 mistake in the process of sending a fax to Agent Erickson
was an error or delay in a ministerial act. Moreover, we do not
know what portion of the 42-day period between the IRS’s receipt
of the Abumayyalehs’ protest and Agent Crandall’s successful fax
of a draft response to Agent Erickson was attributable to Agent
Crandall’s error in handling the file, or whether the error
delayed the ultimate resolution of the administrative proceeding.
Therefore, we decline to address this mistake further.
