                       T.C. Memo. 2010-73



                     UNITED STATES TAX COURT



         THOMAS E. AND DONIENNE C. LARKIN, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 25724-07.               Filed April 14, 2010.



     Thomas E. and Donienne C. Larkin, pro se.

     Wesley C. Pierce (specially recognized),1 for petitioners.

     Jeffery D. Rice, for respondent.




     1
      At trial the Court received an entry of appearance for
petitioners by Wesley C. Pierce and allowed him to try the case.
Later, the Court determined he was not admitted to the Tax Court
bar. Thus, we specially recognize Mr. Pierce.
                                - 2 -

                          MEMORANDUM OPINION

     GOEKE, Judge:   Respondent denied the Larkins’ claim for

abatement of interest pursuant to section 6404.2      The interest in

dispute arises from a 1983 income tax deficiency of $3,374 and an

addition to tax under section 6653(a)(1).      The issue for decision

is whether respondent’s determination not to abate interest was

an abuse of discretion.    We hold that it was not.

                              Background

     Some of the facts have been stipulated, and the stipulated

facts and accompanying exhibits are incorporated herein by this

reference.   At the time they filed their petition, the Larkins

resided in California.

     On August 16, 1984, the Larkins filed their Form 1040, U.S.

Individual Income Tax Return, for the tax year 1983.      On that

return, the Larkins claimed a $26,037 ordinary loss related to

their investment in California Jojoba Investors (CJI), a

partnership.

     On April 28, 1988, the Larkins received a letter from

respondent informing them that an investigation of CJI had

commenced.   At some point in 1988 after receiving the notice,

Mrs. Larkin contacted an IRS employee by telephone and asked how

much was owed for 1983.    She was told that the amount had not



     2
      Unless otherwise indicated, all section references are to
the Internal Revenue Code.
                               - 3 -

been determined.   On November 4, 1991, respondent issued a notice

of final partnership administrative adjustment (FPAA) to CJI.

The FPAA disallowed the partnership’s claimed ordinary loss of

$442,599.

     After receiving the FPAA, Mrs. Larkin again contacted the

IRS by telephone and asked how much she and her husband owed

for 1983.   She was told that the amount had not been determined

but that a payment based upon the Larkins’ own estimate could be

made.

     On December 23, 1991, CJI timely filed a petition in this

Court contesting respondent’s adjustments in the FPAA.    On

November 1, 1993, the parties in Cal. Jojoba Investors v.

Commissioner, docket No. 29993-91, entered into a stipulation to

be bound by the Court’s decision in Utah Jojoba I Research v.

Commissioner, docket No. 7619-90.

     On January 5, 1998, in a Memorandum Opinion, Utah Jojoba I

Research v. Commissioner, T.C. Memo. 1998-6, this Court

determined that the partnership could not deduct its losses as

ordinary and necessary business expenses.   On March 3, 2000, the

Larkins received a letter from the IRS informing them of the

Court’s decision and further stating that the Court’s

determination in Utah Jojoba I Research “will ultimately be

applied to CJI investors” and that if the Larkins signed the

enclosed agreement form, they could settle their case at that
                                 - 4 -

time.     The letter further explained that if the Larkins settled,

they would be sent a report showing the tax computations and a

bill for any amounts owed.     The Larkins did not settle their

case, and the IRS did not assess the 1983 tax liability at that

time.     Mrs. Larkin contacted the IRS in response to the letter

and was told that the liability had not yet been assessed but

that if the Larkins wanted to pay the amount owed, they could do

so using their own computation.

        On April 11, 2005, an order and decision was entered in Cal.

Jojoba Investors v. Commissioner.     It became final on July 10,

2005, 90 days after the order and decision was entered.

     On April 17, 2006, respondent timely issued an affected

items notice of deficiency to the Larkins disallowing the $26,037

flowthrough loss claimed on their 1983 Federal income tax return

and determining a deficiency of $3,374.    The affected items

notice of deficiency also determined additions to tax under

section 6653(a)(1) and (2).    The Larkins did not timely petition

the Tax Court to contest the notice of deficiency.

     On June 29, 2006, the Larkins requested an abatement of

interest of $28,168.57 with respect to the tax liability for

1983.    On July 13, 2006, the request for abatement was denied.

On August 16, 2006, the Larkins appealed the denial to the IRS’

interest abatement coordinator.    By April 2007, the Larkins paid
                                - 5 -

their 1983 tax liability in full, including penalties and

interest.

     On May 25, 2007, the IRS issued a Form 5402-c, Appeals

Transmittal and Case Memo, denying the request for an abatement

of interest.    On June 4, 2007, the IRS Appeals officer requested

that the Larkins’ 1983 tax account be updated with the following

instruction:    “Please have the remaining accrued but unassessed

interest assessed to the account, with manual computations.”

     On July 13, 2007, the IRS sent a letter to the Larkins

explaining that the IRS could not remove the interest on their

account.    On September 5, 2007, the IRS examiner computed the

total amount of interest to be assessed against the Larkins for

1983.   According to the examiner’s computation, the total

interest to be assessed for 1983 was $21,761.73, rather than the

previously assessed amount of $29,893.85.

     On October 8, 2007, respondent sent the Larkins a letter

notifying them of the change to their account for 1983 and that

$8,326.90 would be refunded.    This refund resulted from a

$8,132.12 decrease in assessed interest previously charged and

$194.78 of overpayment interest.

     On November 8, 2007, the Larkins timely filed a petition for

review of respondent’s failure to abate interest under section

6404.   A trial was held on September 14, 2009, in Los Angeles,

California.
                               - 6 -

                            Discussion

     Pursuant to section 6404(e)(1), the Commissioner may abate

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

payment of tax (described in section 6212(a)) if either:     (1)

Such deficiency is attributable to an error or delay by an IRS

employee in performing a ministerial act or (2) any error or

delay in such payment attributable to an IRS employee’s being

erroneous or dilatory in performing a ministerial act.   A

taxpayer can obtain relief only if no significant aspect of the

error or delay can be attributed to the taxpayer.   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 (1986), 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.3   See sec. 6404(h).


     3
      Sec. 6404(h), originally enacted by the Taxpayer Bill of
Rights 2, Pub. L. 104-168, sec. 302, 110 Stat. 1457 (1996), and
codified as sec. 6404(g), gives the Tax Court jurisdiction to
review the Commissioner’s denial of certain taxpayers’ requests
for abatement of interest (but not penalties) if the taxpayer
files a petition with the Court within 180 days after the date a
final determination not to abate interest is mailed by the
Secretary. Banat v. Commissioner, 109 T.C. 92 (1997). Thus, we
decline to resolve the matter of whether the sec. 6653(a)(1) and
(2) additions to tax can be abated because we do not have
jurisdiction to do so.
                                 - 7 -

      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.    A decision concerning the proper

application of Federal tax law is not a ministerial act.    Sec.

301.6404-2T(b)(1), Temporary Proced. & Admin. Regs., 52 Fed. Reg.

30163 (Aug. 13, 1987).   We proceed to consider whether

respondent’s refusal to abate interest was an abuse of

discretion.   Our analysis is segmented into the relevant periods.

A.   April 16, 1984, Through April 27, 1988

      Respondent first contacted petitioners in writing about the

examination of CJI on April 28, 1988.    Only errors or delays

occurring after the Commissioner has initially contacted the

taxpayer in writing with respect to the deficiency are taken into

account.   Sec. 6404(e)(1).   An abatement of interest for the

period between the date the Larkins filed their return (April 16,

1984) and the date the IRS contacted them in writing (April 28,

1988) is not permitted under section 6404(e).    See Krugman v.

Commissioner, 112 T.C. 230, 239 (1999); Sims v. Commissioner,

T.C. Memo. 1999-414.

      Accordingly, we conclude that respondent’s determination not

to abate interest for this period was not an abuse of discretion.
                                - 8 -

B.   April 28, 1988, Through November 4, 1991

       On April 28, 1988, petitioners were notified by letter that

respondent had begun his examination of CJI.    Respondent

concluded his examination when an FPAA for CJI was issued to

petitioners on November 4, 1991.

       The extensive examination of a partnership which results

in delays in the processing of the cases of individual taxpayers

who invested in the partnership is not considered a ministerial

act.    Kimball v. Commissioner, T.C. Memo. 2008-78.   Therefore,

the delay in processing the Larkins’ case cannot be considered

the result of a ministerial act.

       The Larkins have failed to produce evidence that respondent

committed an error or delay in the performance of a ministerial

act during CJI’s examination.    As noted previously, Mrs. Larkin

testified that on April 28, 1988, she attempted to contact the

IRS to ascertain how much was owed for 1983.    At the time Mrs.

Larkin made the inquiry, the examination of CJI had just

commenced.    Thus, the IRS was unable to tell her how much was

owed for 1983 because the deficiency would only be determined

upon completion of the CJI examination.    Since the IRS had not

yet examined the Larkins’ 1983 tax return when Mrs. Larkin

telephoned the IRS, the exact amount they owed had not been

determined.    Therefore, we conclude that respondent did not abuse
                               - 9 -

his discretion and the interest attributable to this decision

cannot be abated for this period.

C.   November 5 Through December 22, 1991

      CJI was subject to the Tax Equity and Fiscal Responsibility

Act of 1982 (TEFRA), Pub. L. 97-248, sec. 402(a), 96 Stat. 648.

Partnerships are not subject to Federal income tax but are

required nevertheless to file annual information returns

reporting their partners’ distributive shares of tax items.    See

secs. 701, 6031.   The individual partners such as the Larkins are

required to report their distributive shares of those tax items

on their individual Federal income tax returns.    See secs.

701-704.

      To remove the substantial administrative burden occasioned

by duplicate audits and litigation and to provide consistent

treatment of partnership tax items among partners in the same

partnership, Congress enacted the unified audit and litigation

procedures of TEFRA.   See Randell v. United States, 64 F.3d 101,

103 (2d Cir. 1995); H. Conf. Rept. 97-760, at 599-600 (1982),

1982-2 C.B. 600, 662-663.

      Under TEFRA, all partnership items are determined in a

single partnership-level proceeding.    Sec. 6226; see also Randell

v. United States, supra at 103.     The determination of partnership

items in a partnership-level proceeding is binding on the

partners and generally may not be challenged in a subsequent
                               - 10 -

partner-level proceeding.   See secs. 6230(c)(4), 7422(h).   This

precludes the need for relitigating the same issues with each

partner of the partnership.

     Should an FPAA be issued to the partnership, the tax matters

partner can contest the FPAA within 90 days by filing for

readjustment of “partnership items” with this Court under section

6226(a).   The Commissioner is prohibited from assessing tax based

on adjustments to partnership items before:    (1) The close of the

150th day after the mailing of the FPAA to the tax matters

partner, and (2) if the tax matters partner files a petition in

the Tax Court within the 150-day period, until the decision of

the Tax Court becomes final.   Sec. 6225(a).

      Respondent issued the FPAA for CJI on November 4, 1991.    No

tax attributable to partnership adjustments to partners’ returns

can be assessed until after a Tax Court partnership case is

commenced by the tax matters partner.   On December 23, 1991, CJI

timely petitioned the Tax Court, contesting the FPAA adjustments.

Accordingly, we find respondent did not abuse his discretion in

refusing to abate interest for this period because the IRS was

prohibited from assessing the Larkins’ tax liability between

November 8 and December 22, 1991, because the period provided by

section 6225(a)(1) had not expired.
                               - 11 -

D.   December 23, 1991, Through July 9, 2005

      On April 11, 2005, the Tax Court entered a decision in Cal.

Jojoba Investors v. Commissioner, docket No. 29993-91.      The

Court’s decision did not become final until July 10, 2005 (90

days after the decision was entered).   If a petition is filed in

response to an FPAA, section 6225(a)(2) prohibits assessment

based on an adjustment to partnership items until the decision of

the Tax Court in the partnership’s case becomes final.   As a

result, respondent was prohibited from assessing or collecting

any taxes attributable to a partnership-item adjustment related

to CJI before July 10, 2005.

      The Larkins’ deficiency for 1983 could not be assessed until

July 10, 2005.   Accordingly, we find that respondent did not

abuse his discretion in refusing to abate interest for this

period because no tax could be assessed until 90 days after the

Larkins received an affected items notice of deficiency.

E.   July 10, 2005, Through April 17, 2006

      The Larkins have alleged that respondent was dilatory in his

actions between July 10, 2005, the date the Tax Court’s decision

in Cal. Jojoba Investors v. Commissioner, docket No. 29993-91,

became final, and April 17, 2006, the date the notice of

deficiency was issued to the Larkins.   The Tax Court has

acknowledged in previous opinions that the press of business and

the Commissioner’s internal processing procedures require a
                              - 12 -

certain amount of time and that a “mere passage of time does not

establish error or delay in performing a ministerial act.”    See

Howell v. Commissioner, T.C. Memo. 2007-204; Jaffe v.

Commissioner, T.C. Memo. 2004-122, affd. 175 Fed. Appx. 853 (9th

Cir. 2006); Deverna v. Commissioner, T.C. Memo. 2004-80.

      Respondent had 1 year after the decision in Cal. Jojoba

Investors v. Commissioner, docket No. 29993-91, became final to

issue an affected items notice of deficiency to petitioners.     See

sec. 6229(d).   The limitations period for issuing an affected

items notice of deficiency remained open until July 10, 2006, 1

year after the date CJI’s decision became final.   Respondent’s

issuance within the statutory period of a notice of deficiency is

not dilatory or attributable to ministerial error.     Accordingly,

respondent did not abuse his discretion for this period.

F.   April 17, 2006, Through April 6, 2007

      The Larkins received a notice of deficiency on April 17,

2006.   Section 6213(a) provides that a petition for

redetermination of a deficiency determined by the Commissioner is

timely if it is filed within 90 days after a notice of deficiency

is mailed.   The Larkins had 90 days from the date of the mailing

of the notice of deficiency to file a petition in response.     They

chose not to contest the notice of deficiency, and respondent

assessed the deficiency and additions to tax.
                                - 13 -

       Petitioners failed to produce at trial any evidence that

there was a delay or error in performing a ministerial act from

the last day the Larkins could have filed a petition contesting

the notice of deficiency, July 17, 2006, to the day they fully

paid their 1983 tax liability, April 6, 2007.

G.   April 7 Through November 7, 2007

       On June 4, 2007, respondent requested that all “remaining

accrued but unassessed interest” be assessed to the Larkins’

account.    On October 8, 2007, respondent issued a notice

informing them of a refund due for their 1983 tax year of

$8,326.90.    The notice stated that the refund resulted from an

$8,132.12 decrease in interest previously charged and a $194.78

overpayment of interest.    According to respondent’s computations,

only $21,761.73 of interest should have been assessed, not

$29,893.85.    As a result of this computation, respondent issued

the Larkins a refund which included the difference in interest.

       The Larkins argue that when respondent issued the $8,326.90

refund, respondent was tacitly admitting that they were entitled

to an abatement.    Interest abatements are permitted if a delay is

attributable to unreasonable errors or delays by an official or

employee of the IRS in performing a ministerial or managerial

act.    Sec. 6404(e)(1).   Any abatement of interest applies only to

the period attributable to the failure to perform the ministerial

act.    Pettyjohn v. Commissioner, T.C. Memo. 2001-227.   Further,
                             - 14 -

section 6404(e) requires that a taxpayer not only identify an

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

part, but also identify a specific period over which interest

should be abated as a result of such error or delay.     Spurgin v.

Commissioner, T.C. Memo. 2001-290.    The Larkins have not

presented any evidence of why the refund of overpaid interest

should be considered a ministerial breach.     Their refund was a

result of a recomputation of the proper amount of interest, not

any ministerial error.

     We conclude that respondent did not abuse his discretion by

determining not to abate interest.

     To reflect the foregoing,


                                      Decision will be entered for

                                 respondent.
