                        T.C. Memo. 2000-220



                      UNITED STATES TAX COURT



                WILLIAM M. DONOVAN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 18855-97, 23139-97.            Filed July 21, 2000.



     Alyce C. Halchak, for petitioner.

     Julia A. Cannarozzi, for respondent.

                        MEMORANDUM OPINION

     DAWSON, Judge:   These cases were assigned to Special Trial

Judge Lewis R. Carluzzo pursuant to section 7443A(b)(4) and Rules

180, 181, and 183.1   The Court agrees with and adopts the opinion

of the Special Trial Judge, which is set forth below.



     1
      Unless otherwise indicated, section references are to the
Internal Revenue Code in effect at the time that the petitions
were filed in these cases. Rule references are to the Tax Court
Rules of Practice and Procedure.
                                - 2 -

               OPINION OF THE SPECIAL TRIAL JUDGE

     CARLUZZO, Special Trial Judge:     On March 25, 1997,

respondent issued a notice of final determination denying

petitioner’s request to abate interest on deficiencies for the

years 1980 and 1981.   On June 16, 1997, respondent issued a

notice of final determination denying petitioner’s request to

abate interest on deficiencies for the years 1982 and 1983.    In

response to each notice a timely petition was filed pursuant to

section 6404(g)2.   The two abatement cases were consolidated for

trial, briefing, and opinion.

     The issue for decision is whether respondent’s failure to

abate accrued interest assessed on deficiencies for the years

1980 through 1983, inclusive, as requested in petitioner’s claims

for abatement was an abuse of discretion.

Background

     Some of the facts have been stipulated and are so found.    At

the time the petitions in these cases were filed, petitioner

resided in New Canaan, Connecticut.

     Although not readily apparent from the magnitude of the

record in these cases, which includes 109 exhibits and the




     2
      After the petitions were filed in these cases, sec. 6404(g)
was redesignated sec. 6404(i) by the Internal Revenue Service
Restructuring & Reform Act of 1998, Pub. L. 105-206, secs.
3305(a), 3309(a), 112 Stat. 685, 743, 745.
                               - 3 -

testimony of four witnesses over 2 days of trial, the relevant

facts are not in dispute and are easily summarized.

     During 1980, 1981, 1982, and 1983, petitioner invested in

certain tax shelter partnerships (the tax shelters).    Deductions

or losses stemming from the tax shelters were claimed on his

Federal income tax returns for those years.   A deficiency was

determined for each of those years (the deficiency years).    On

August 8, 1985, petitioner petitioned this Court for a

redetermination of the 1981 deficiency, and on June 5, 1986,

petitioner petitioned this Court for redeterminations of the

1980, 1982, and 1983 deficiencies (the deficiency cases).

     The tax shelters generated approximately 1,100 Tax Court

cases.   Most of the taxpayers involved in those cases were

represented by two attorneys (the project attorneys).    Petitioner

was not.   Instead, petitioner was represented by Attorney Robert

W. Taylor.   After various pretrial proceedings and arrangements,

in 1987 a settlement was negotiated between the project attorneys

and respondent.   Although not represented by the project

attorneys, petitioner was given the opportunity in 1987 to settle

the deficiency cases upon the same terms that the project

attorneys negotiated for their clients.   Upon the advice and

recommendation of Mr. Taylor, petitioner rejected the settlement.

Seven years later, in 1994 petitioner accepted the    settlement

offered to him in 1987.   Stipulated decision documents reflecting
                                - 4 -

the redetermined deficiencies (the deficiencies) were entered in

1994.    Petitioner paid the 1980 and 1982 deficiencies on

September 19, 1994; he paid the 1983 deficiency on September 20,

1994; and he paid the 1981 deficiency on November 28, 1994. None

of the interest that has accrued on any of the deficiencies has

been paid.

     In claims for abatement originally made in December 1994 and

resubmitted in February 1997, petitioner requested abatements of

all of the interest that had accrued on the deficiencies.    As

noted above, petitioner’s claims were denied in notices of final

determination issued by respondent in 1997.

Discussion

     Subject to exceptions not relevant here, interest on a

deficiency begins to accrue on the due date of the return and

continues to accrue, compounding daily, until payment is made.

See secs. 6601(a), 6622.

     The Commissioner has the authority to abate the assessment

of interest on a deficiency if the accrual of such interest is

attributable to an error or delay by an official or employee of

the Internal Revenue Service in performing a ministerial act.

See sec. 6404(e)(1).3   A ministerial act means a procedural or


     3
      Sec. 6404(e) was amended by sec. 301 of the Taxpayer Bill
of Rights 2, Pub. L. 104-168, 110 Stat. 1452, 1457 (1996), to
permit respondent to abate interest with respect to an
“unreasonable” error or delay resulting from “managerial” or
                                                   (continued...)
                               - 5 -

mechanical act that does not involve the exercise of judgment.

See Lee v. Commissioner, 113 T.C. 145 (1999); sec. 301.6404-2T,

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

1987).   Subject to various procedural and other requirements set

forth in the statute and not here in dispute, the Court has

jurisdiction over any action brought by a taxpayer to determine

whether the Commissioner’s failure to abate interest was an abuse

of discretion.   See sec. 6404(g).

     As a preliminary point, we note that interest is defined as

“compensation for the use or forbearance of money”.    Deputy v.

Dupont, 308 U.S. 488, 498 (1940).    “Use or forbearance” connotes

the passage of time.   Consistent with the definition of interest,

section 6404(e) requires not only the identification of an error

or delay caused by a ministerial act on the Commissioner’s part,

but the identification of a specific period of time over which

interest should be abated as a result of the error or delay.

See, e.g., Krugman v. Commissioner, 112 T.C. 230 (1999); Douponce

v. Commissioner, T.C. Memo. 1999-398.

     The expected correlation between the error or delay

attributable to a ministerial act on respondent’s part and a

specific period of time is, for the most part, missing in these


     3
      (...continued)
ministerial acts. The amendment is effective for interest
accruing with respect to deficiencies or payments for tax years
beginning after July 30, 1996, and is therefore inapplicable
here.
                               - 6 -

cases because petitioner requests that all interest with respect

to the deficiencies be abated.4   In effect, petitioner is not so

much seeking an abatement of interest as he is an exemption from

it.   Characterized in that manner, and among other infirmities5,

the scope of petitioner’s request, simply put, is beyond that

contemplated by the statute, which the Congress did not intend

would “be used routinely to avoid payment of interest”.   H. Rept.

99-426, at 844 (1985), 1986-3 C.B. (Vol. 2) 1, 844; S. Rept. 99-

313, at 208 (1986), 1986-3 C.B. (Vol. 3) 1, 208.   Respondent’s

failure to abate interest as requested in petitioner’s claims is

supported not only by the overly broad scope of those claims, but

for other reasons, as discussed below in the context of specific

time frames.

      Subject to other requirements, under 6404(e) a taxpayer is

entitled to an abatement of assessed interest on a deficiency

only for any period starting “after the Internal Revenue Service

has contacted the taxpayer in writing with respect to such



      4
      There are variances between the relief requested in
petitioner’s claims for abatement and the relief requested in
petitioner’s brief. Because we review respondent’s failure to
abate interest for abuse of discretion, we focus upon the claims
for abatement. Cf. Sego v. Commissioner, 114 T.C. ___ (2000).
      5
      The petitions suggest that because the deficiencies
reflected in the stipulated decisions entered in the deficiency
cases are less than the deficiencies determined in the notices of
deficiency upon which those cases were based, respondent erred
within the meaning of section 6404(e)(1). The pure folly of this
position is reflected by its abandonment on brief.
                                  - 7 -

deficiency”.   Sec. 6404(e)(1).    Stated differently, section

6404(e)(1) does not provide for the abatement of interest

assessed on a deficiency for the period between the dates that

the return is due and the taxpayer is contacted in writing with

respect to the deficiency.   In his brief, petitioner appears to

have recognized this limitation, but he does not expressly

concede entitlement to abatements of interest that accrued prior

to the relevant dates, which are not in dispute.     In any event,

for each of the deficiency years, respondent’s failure to abate

interest for the period that ran from the due date of the return

until respondent contacted petitioner in writing with respect to

the deficiency is consistent with the statute.     Because the

statute does not authorize an abatement of interest for such

period, respondent’s failure to do so is not an abuse of

discretion.

     Petitioner’s primary contention is that interest on the

deficiencies should be abated because of respondent’s conduct in

connection with the deficiency cases.     According to petitioner,

the deficiency cases could have been concluded much sooner than

they were if not for certain actions on respondent’s part.

First, we disagree with petitioner’s suggestion that progress in

the deficiency cases was controlled by respondent.     More

importantly, to the extent that petitioner identified specific

actions taken by respondent in the deficiency cases, such actions
                                - 8 -

were not ministerial acts within the meaning of section 6404(e).

See Taylor v. Commissioner, 113 T.C. 206 (1999); Lee v.

Commissioner, supra.

     Furthermore, section 6404(e) applies “only if no significant

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

involved.”    As we view the matter, petitioner’s conduct, more so

than respondent’s, resulted in the length of time that the

deficiency cases were pending before this Court.    Petitioner

could have settled the deficiency cases within 1 year after the

second case was filed.    Instead, he waited approximately 7 years

to do so.    Mr. Taylor (petitioner’s attorney in the deficiency

cases) testified that at the time he did not understand

respondent’s settlement offer and the delay in accepting it was

due to respondent’s failure, or refusal, to explain it to him.

Mr. Taylor’s explanation for the delay is less than compelling

considering his testimony long after the fact that, in his

opinion, petitioner should not have accepted respondent’s offer

because of the weaknesses in respondent’s positions in the

deficiency cases.    Nevertheless, even if respondent had some

obligation to explain the settlement proposal to petitioner’s

attorney in the deficiency cases, an obligation assumed by

petitioner but unsupported by any authority, and even if

respondent failed to do so, respondent’s failure does not

constitute a ministerial act.
                               - 9 -

     We have considered all of petitioner’s complaints regarding

respondent’s conduct in connection with the deficiency cases,

including the claim made in petitioner’s brief that the 1981

deficiency was erroneously overstated in the stipulated decision

entered in the case involving that year, and find that none

supports a ground for relief under section 6404(e).    Respondent’s

conduct in connection with the deficiency cases provides no basis

to conclude that respondent’s failure to abate interest was an

abuse of discretion.

     Petitioner paid the deficiencies on various dates between

September 19 and November 28, 1994.    None of the interest has

been paid.   As of the date that each of the deficiencies was

paid, interest ceased to run on the underlying tax.    However,

because no interest was paid, and because interest that accrued

after December 31, 1982, is compounded daily, interest continued

to accrue (and continues to accrue) after the dates that the

deficiencies were paid.   Interest accruing after the dates that

the deficiencies were paid is due to petitioner’s failure to pay

the outstanding interest obligations and not due to a ministerial

act on respondent’s part.   See Douponce v. Commissioner, T.C.

Memo. 1999-398.   Respondent’s failure to abate interest for any

period after the dates that the deficiencies were paid was not an

abuse of discretion.
                        - 10 -

To reflect the foregoing,

                                 Decisions will be entered

                            for respondent.
