                        T.C. Memo. 2009-120



                      UNITED STATES TAX COURT



JEAN MATHIA AND ESTATE OF DOYLE V. MATHIA, DECEASED, JEAN MATHIA,
             PERSONAL REPRESENTATIVE, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 16483-05L.                Filed May 27, 2009.



     Mark W. Curnutte, for petitioners.

     Ann L. Darnold, for respondent.



                        MEMORANDUM OPINION


     MARVEL, Judge:   Pursuant to section 6330(d),1 petitioners

seek review of respondent’s determination to proceed with the

collection of petitioners’ 1982, 1983, and 1984 Federal income


     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
                                   - 2 -

tax liabilities.       Petitioners also seek review under section

6404(h) of respondent’s determination to deny petitioners’

request for abatement of interest under section 6404(e).

                                Background

       The parties submitted this case fully stipulated under Rule

122.       The stipulation of facts is incorporated herein by this

reference.

       Jean Mathia (Mrs. Mathia) resided in Oklahoma when she

petitioned this Court on her own behalf and as personal

representative of the Estate of Doyle V. Mathia, her deceased

husband.       Doyle V. Mathia (Mr. Mathia) and Mrs. Mathia2 were

married and filed joint Federal income tax returns for all

relevant years.       Mr. Mathia died on February 19, 2000.

       Mr. Mathia was a limited partner in Greenwich Associates

(Greenwich), a New York limited partnership subject to the

unified audit and litigation procedures of the Tax Equity and

Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. 97-248, sec.

402(a), 96 Stat. 648, for the relevant tax years.       Greenwich was

one of approximately 50 partnerships and joint ventures

participating in coal programs sponsored by the Swanton

Corp., a Delaware corporation (collectively referred to as the

Swanton partnerships).



       2
      We use the term “petitioners” throughout this opinion to
refer to Mr. Mathia or his estate and Mrs. Mathia.
                               - 3 -

     Thirty of the Swanton partnerships were formed before the

enactment of TEFRA.   The remaining 20 Swanton partnerships,

including Greenwich, were formed after the enactment of TEFRA and

are subject to the TEFRA unified audit and litigation provisions

applicable to partnerships (Swanton TEFRA partnerships).

     Mr. Mathia owned an 8.484-percent limited partnership

interest in Greenwich at all relevant times.3   Mr. Mathia was

neither a section 6223(a) notice partner nor a member of a notice

group described under section 6223(b)(2).4

     Kevin Smith (Mr. Smith) served as the general partner and

tax matters partner (TMP) of Greenwich.   Neither Mr. Mathia nor

Mrs. Mathia notified respondent that Mr. Smith did not have

authority to enter into a settlement agreement on their behalf.




     3
      Mrs. Mathia, individually, was never a partner in
Greenwich.
     4
      Under sec. 6223(a), a partner is not entitled to notice
unless the Secretary receives sufficient information to determine
whether the partner is entitled to the notice and to enable the
Secretary to provide the notice to the partner. Under sec.
6223(b)(2), if a partnership has more than 100 partners, a group
of partners having a 5-percent or more interest in the profits of
the partnership can request that one of their members receive the
notice. The parties stipulated that Mr. Mathia was neither a
notice partner nor a member of a notice group and that the
Greenwich tax matters partner (TMP) had authority to bind all of
Greenwich’s partners to the stipulation of settlement.
Respondent subsequently moved for relief from the designated
stipulations, alleging that they were in error. In a Memorandum
Opinion filed as T.C. Memo. 2007-4, we concluded that respondent
was not entitled to relief from the stipulations.
                               - 4 -

     Respondent determined that the only purpose of the Swanton

partnerships was to generate tax deductions.    On or before

March 16, 1987, Greenwich received a notice of the beginning of

an administrative proceeding (NBAP) for tax years 1982, 1983, and

1984.5   On August 3, 1990, respondent issued to Greenwich a

notice of final partnership administrative adjustment (FPAA) for

1982, 1983, and 1984.   Mr. Smith timely filed a petition for

review in this Court under section 6226 (the Greenwich

litigation).

     In the Greenwich litigation Greenwich was represented by

Henry G. Zapruder (Mr. Zapruder) and Matthew Lerner (Mr. Lerner)

of Zapruder & Odell, a law firm that served as counsel for most

of the Swanton TEFRA partnerships.6    In or about September 1991

respondent’s attorneys and Zapruder & Odell reached an agreement

in principle regarding the parameters of a settlement with

respect to 19 of the 20 Swanton TEFRA partnerships, including

Greenwich (1991 agreement).   The 1991 agreement was reflected in

an exchange of letters between Zapruder & Odell on behalf of the

partnerships and respondent’s attorneys, Robert Marino and Moira



     5
      The record does not indicate the precise date on which
respondent issued Greenwich the NBAP.
     6
      In the attachment to notices of determination dated Aug. 5,
2005, issued by the Appeals Office with respect to the lien and
proposed levy, the Appeals Office states that Mr. Lerner did not
represent Greenwich. We find to the contrary on the basis of the
stipulations of the parties.
                               - 5 -

Sullivan (Ms. Sullivan).   Included in the 1991 agreement was a

requirement that the TMP for each partnership sign a Rule 248(a)

decision document.7

     After respondent’s attorneys and Zapruder & Odell reached

the 1991 agreement, they continued to negotiate aspects of the

proposed settlement.   They also began the process of applying the

general terms to each partnership and partner.   That process

included gathering and exchanging information to enable

respondent to calculate partnership-level adjustments and each

partner’s distributive share adjustment, preparing reports

showing the calculations, and preparing and executing decision

documents that memorialized the terms of the proposed settlement

with respect to each Swanton partnership as well as closing

agreements as appropriate.

     By letter dated January 10, 1992, Zapruder & Odell requested

that respondent “designate someone * * * to administer the

settlement of the Swanton cases.”   By letter dated January 15,

1992, respondent’s counsel advised Zapruder & Odell that

respondent had assigned another attorney, Frances Chan, “to

immediately effectuate the settlement of the Swanton

Partnerships.”   Respondent’s counsel also requested verification



     7
      Rule 248(a) states that “A stipulation consenting to entry
of decision executed by the tax matters partner and filed with
the Court shall bind all parties.” Under Rule 248(a) the TMP’s
signature certifies that no party objects to entry of decision.
                               - 6 -

of each partner’s investment in the 19 Swanton TEFRA partnerships

that agreed to move forward with the settlement.

     In July 1995 respondent sent to Mr. Lerner and Mr. Smith

letters enclosing the following documents with respect to the

Greenwich litigation:   (1) The decision document reflecting

adjustments to partnership items for each of the years 1982,

1983, and 1984; (2) the computations on which the decision

document was based; (3) closing agreements for some of the

Greenwich limited partners;8 and (4) Forms 886Z(C), Partner’s or

S Corporation Shareholders’ Shares of Income.   Respondent

informed Mr. Lerner9 and Mr. Smith that limited partners in

Greenwich seeking treatment deviating from the adjustments in the

decision document needed to sign individual closing agreements

before the decision document could be filed with the Court.    The

letter also stated the following:




     8
      By letter dated sometime in July 1995, Ms. Sullivan sent to
Mr. Lerner a revised closing agreement for one of the Greenwich
limited partners. On that same date, Ms. Sullivan mailed copies
of all amended closing agreements to Mr. Smith so that Mr. Smith
could arrange for execution of the agreements by the affected
partners.
     9
      Although Mr. Lerner remained one of Greenwich’s counsel of
record until November 1999, he apparently left Zapruder & Odell
in May 1996. Mr. Lerner withdrew from the Greenwich litigation
in 1999.
                               - 7 -

          Please understand that your signing each
     partnerships’ [sic] Decision Documents constitutes the
     offer to settle that particular partnership with the
     Internal Revenue Service and the countersignature of
     the documents constitutes the Internal Revenue
     Service’s acceptance of that offer. No settlement of
     any partnership will be final until these documents are
     countersigned by the Internal Revenue Service.

On September 11, 1996, Mr. Smith signed the decision document.

On September 25, 1996, Mr. Lerner signed the decision document

and returned it to respondent’s attorneys that same day.

     By letters dated July 17 and November 7, 1996, Greenwich’s

counsel mailed executed closing agreements with respect to

Greenwich to Ms. Sullivan.   Although none of the letters in the

record disclosed how many of the Greenwich limited partners were

required to sign closing agreements, the attachment to the

notices of determination stated that seven partners were required

to execute closing agreements before the Greenwich decision

document could be signed by respondent.    Mr. Mathia was not one

of them.10   The attachment also stated that the closing

agreements were dated from November 12, 1999, to November 27,

2000, but did not identify the date to which it referred (e.g.

date of receipt, date executed by taxpayer, date executed by

respondent’s agent, effective date).11    The stipulated record


     10
      Mr. Mathia did not execute a closing agreement, and his
wife did not execute one on his behalf.
     11
      The attachment further states that “The most significant
delays encountered with this partnership were both in contacting
                                                   (continued...)
                               - 8 -

does not explain why the closing agreements were dated in 1999

and 2000 when they were mailed to respondent in 1996.12

     By letter dated February 27, 2001, Ms. Sullivan sent another

decision document with respect to the Greenwich litigation and

the computations on which the decision document was based to Mr.

Zapruder.   The decision document was identical to the one mailed

to Greenwich in 1995.   In the letter Ms. Sullivan asked Mr.

Zapruder to sign the document, to have Mr. Smith sign the

document, and to return the signed decision document to her.    Ms.

Sullivan represented that as soon as respondent’s counsel

received the signed decision document, they would get it

countersigned and file it immediately with the Court.     Ms.

Sullivan also described what would happen after the decision was

entered by the Court, and she warned Mr. Zapruder that his

signature on the decision document “constitutes the offer to

settle” and that the countersignature “constitutes the Internal

Revenue Service’s acceptance of that offer.”   The stipulated



     11
      (...continued)
the tax matters partner, Smith, and receiving his signed 906’s.”
However, we can find no evidence in the record other than the
conclusory statement in the attachment to support a finding that
the delay in executing the closing agreements was attributable to
either Greenwich’s TMP or its counsel.
     12
      In 2004 Appeals Officer Troy Talbott attempted to find out
the date by which the Internal Revenue Service had received all
of the Forms 906, Closing Agreement on Final Determination
Covering Specific Matters, for Greenwich, but he was apparently
unable to do so.
                               - 9 -

record does not contain any explanation as to why a second

decision document was mailed to Greenwich’s counsel after they

had already delivered the executed original of the first decision

document to Ms. Sullivan on September 25, 1996.

     On August 30, 2001, respondent countersigned the decision

document and submitted it to this Court.   The Court filed the

decision document on August 31, 2001, as a stipulation of

settlement (Greenwich stipulation).    On September 7, 2001, this

Court issued an order to show cause, directing Mr. Smith to file

a written response showing cause as to why the Court should not

enter a decision in accordance with the terms of the Greenwich

stipulation.   Mr. Smith did not file a response, and on January

17, 2002, this Court entered an order and decision resolving the

Greenwich litigation.   On April 17, 2002, the decision became

final.

     On September 27, 2002, respondent mailed petitioners a Form

4549A-CG, Income Tax Examination Changes, notifying them of a

computational adjustment13 to their 1983 income tax liability as

a result of the resolution of the Greenwich litigation.   On

January 8, 2003, respondent notified petitioners of adjustments

to their 1982 and 1984 income tax liabilities.    Petitioners did


     13
       A computational adjustment changes the tax liability of a
partner to properly reflect the treatment of a partnership item.
Sec. 301.6231(a)(6)-1T, Temporary Proced. & Admin. Regs., 52 Fed.
Reg. 6790 (Mar. 5, 1987), amended 64 Fed. Reg. 3840 (Jan 26,
1999).
                              - 10 -

not agree to waive or extend any period of limitations for the

assessment of their 1982, 1983, or 1984 tax liability.   On

January 27, 2003, respondent assessed against petitioners the

income tax deficiencies and interest for 1982, 1983, and 1984

attributable to the computational adjustments.   On October 27,

2003, petitioners paid all of the tax, but not the interest, that

respondent had assessed.14

     On February 6, 2004, petitioners submitted Forms 843, Claim

for Refund and Request for Abatement, requesting an abatement of

the interest accrued on their 1982, 1983, and 1984 income tax

liabilities under section 6404.

     On February 10, 2004, respondent issued to petitioners a

Final Notice–-Notice of Intent to Levy and Notice of Your Right

to a Hearing for 1982, 1983, and 1984, and petitioners timely

requested a section 6330 hearing.   On April 2, 2004, respondent

issued to petitioners a Notice of Federal Tax Lien Filing and

Your Right to a Hearing Under IRC 6320, for 1983 and 1984, and

petitioners timely requested a section 6320 hearing.

     On April 7, 2004, respondent denied petitioners’ interest

abatement claim.   On May 5, 2004, petitioners submitted a request

to respondent’s Appeals Office to review the denial of their

interest abatement claim.



     14
      Petitioners paid $149,360, $4,015, and $2,331,
respectively, towards their 1982, 1983, and 1984 tax liabilities.
                              - 11 -

     On October 15, 2004, Mrs. Mathia, acting individually, filed

a Form 8857, Request for Innocent Spouse Relief, wherein she

sought relief under section 6015 from joint and several liability

for all tax liabilities attributable to Greenwich for 1982, 1983,

and 1984.   On July 8, 2005, respondent granted Mrs. Mathia’s

request for relief.

     On August 5, 2005, respondent issued to petitioners a notice

of determination with respect to the notice of intent to levy and

a second notice of determination with respect to the notice of

Federal tax lien filing.   On August 18, 2005, respondent issued a

final determination letter to petitioners denying petitioners’

request for abatement of interest under section 6404.   The final

determination did not set forth any facts to explain the 5-year

delay between the execution of the decision by the Greenwich TMP

and counsel and the execution of the decision on behalf of

respondent.   The final determination simply stated that “We do

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

abatement of interest in our review of available records and

other information.”

     On September 6, 2005, petitioners timely filed a petition

contesting each of respondent’s determinations.   Petitioners

contend that under section 6229(f), the period for assessment

expired before respondent assessed petitioners’ 1982, 1983, and

1984 tax liabilities.   Alternatively, petitioners argue that
                                   - 12 -

respondent improperly denied their interest abatement claims

under sections 6404 and 6621(d).

                                 Discussion

I.      Determination To Proceed With Lien and Levy

        A.     Section 6330(d) Review

        Under section 6320(a) the Secretary15 is required to notify

the taxpayer in writing of the filing of a Federal tax lien and

inform the taxpayer of his right to a hearing.       Section 6330(a)

similarly provides that no levy may be made on a taxpayer’s

property or right to property unless the Secretary notifies the

taxpayer in writing of his right to a hearing before the levy is

made.        If the taxpayer requests a hearing under either section

6320 or 6330, a hearing shall be held before an impartial officer

or employee of the Internal Revenue Service (IRS) Office of

Appeals.16       Secs. 6320(b)(1), (3), 6330(b)(1), (3).   At the

hearing a taxpayer may raise any relevant issue, including

appropriate spousal defenses, challenges to the appropriateness


        15
      The term “Secretary” means “the Secretary of the Treasury
or his delegate”, sec. 7701(a)(11)(B), and the term “or his
delegate” means “any officer, employee, or agency of the Treasury
Department duly authorized by the Secretary of the Treasury
directly, or indirectly by one or more redelegations of
authority, to perform the function mentioned or described in the
context”, sec. 7701(a)(12)(A).
        16
      Sec. 6320(b)(4) provides that to the extent practicable, a
hearing under sec. 6320 should be held in conjunction with a sec.
6330 hearing, and sec. 6320(c) provides that sec. 6330(c), (d)
(other than par. (2)(B)), and (e) applies for purposes of the
sec. 6320 hearing.
                              - 13 -

of the collection action, and collection alternatives.    Sec.

6330(c)(2)(A).   A taxpayer is precluded from contesting the

existence or amount of the underlying tax liability unless the

taxpayer did not receive a notice of deficiency for the tax in

question or did not otherwise have an opportunity to dispute the

tax liability.   Sec. 6330(c)(2)(B); see also Sego v.

Commissioner, 114 T.C. 604, 609 (2000).

     Following a hearing the Appeals Office must determine

whether the Secretary may proceed with the proposed collection

action.   In so doing, the Appeals Office is required to consider:

(1) The verification presented by the Secretary that the

requirements of applicable law and administrative procedures have

been met; (2) the relevant issues raised by the taxpayer; and (3)

whether the proposed collection action appropriately balances the

need for efficient collection of taxes with a taxpayer’s concerns

regarding the intrusiveness of the proposed collection action.

Sec. 6330(c)(3).

     Section 6330(d)(1) grants the Court jurisdiction to review

the determination made by the Appeals Office.    Where the

underlying tax liability is not in dispute, the Court will review

that determination for abuse of discretion.     Lunsford v.

Commissioner, 117 T.C. 183, 185 (2001); Sego v. Commissioner,

supra at 610; Goza v. Commissioner, 114 T.C. 176, 182 (2000).

Where the underlying tax liability is properly at issue, the
                              - 14 -

Court reviews any determination regarding the underlying tax

liability de novo.   Sego v. Commissioner, supra at 610.

     Petitioners’ primary argument–-that the applicable period of

limitations expired before respondent’s assessment–-constitutes a

challenge to petitioners’ underlying tax liability.   See Boyd v.

Commissioner, 117 T.C. 127, 130 (2001).   Respondent concedes that

petitioners did not have a prior opportunity to dispute whether

the assessment following the completion of the Greenwich

litigation was timely, and he does not question our jurisdiction

to consider the issue.   Accordingly, we review respondent’s

determination regarding the period of limitations de novo.

     B.   Burden of Proof

     In Amesbury Apartments, Ltd. v. Commissioner, 95 T.C. 227,

240-241 (1990), we addressed as follows the taxpayer’s argument

that the section 6229(a) assessment period had expired:

          The expiration of the period of limitation on
     assessment is an affirmative defense, and the party
     raising it must specifically plead it and carry the
     burden of proving its applicability. Rules 39, 142(a).
     To establish this defense, the taxpayer must make a
     prima facie case establishing the filing of the
     partnership return, the expiration of the statutory
     period, and receipt or mailing of the notice after the
     running of the period. Miami Purchasing Service Corp.
     v. Commissioner, 76 T.C. 818, 823 (1981); Robinson v.
     Commissioner, 57 T.C. 735, 737 (1972). Where the party
     pleading the defense makes such a showing, the burden
     of going forward with the evidence shifts to
     respondent who must then introduce evidence to show
     that the bar of the statute is not applicable. Adler
     v. Commissioner, 85 T.C. 535, 540 (1985). Where
     respondent makes such a showing, the burden of going
     forward then shifts back to the party pleading the
                               - 15 -

     affirmative defense to show that the alleged exception
     to the expiration of the period is invalid or otherwise
     inapplicable. Adler v. Commissioner, supra at 540.
     The burden of proof, i.e., the burden of ultimate
     persuasion, however, never shifts from the party who
     pleads the bar of the statute of limitations. Adler v.
     Commissioner, supra at 540.

Accordingly, if petitioners present a prima facie case that

respondent failed to timely assess tax and interest under section

6229, the burden of production shifts to respondent to show that

the period of limitations had not expired before the assessments.

The burden of proof, however, remains with petitioners at all

times.17   See Rule 142(a).

     C.    Period of Limitations for Making Assessments

     Under the TEFRA partnership provisions, the income tax

treatment of partnership items ordinarily is determined through a

proceeding conducted at the partnership level.    Sec. 6221.

Section 6231(a)(3) defines a partnership item as any item to be

taken into account for the partnership’s taxable year to the


     17
      Petitioners filed a motion to shift the burden of proof
under sec. 7491(a). Sec. 7491 shifts the burden of proof to the
Secretary if the taxpayer introduces credible evidence with
respect to any factual issue relevant to ascertaining the
liability of the taxpayer. However, sec. 7491 applies only to
court proceedings arising in connection with examinations
commencing after the date of its enactment, July 22, 1998.
Internal Revenue Service Restructuring and Reform Act of 1998
(RRA 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 726. Because
the examination of Greenwich and its partners commenced well
before the enactment of sec. 7491, and because the computational
adjustments to petitioners’ 1982, 1983, and 1984 returns were
made in accordance with the result of the Greenwich examination,
sec. 7491(a) is inapplicable. Consequently, we denied
petitioners’ motion.
                               - 16 -

extent regulations provide that the item is more appropriately

determined at the partnership level than at the partner level.18

The regulations contain an extensive list of matters that fall

within the definition of partnership item.   See sec.

301.6231(a)(3)-1, Proced. & Admin. Regs.

     To commence a partnership-level proceeding, the Commissioner

must issue an NBAP to the TMP19 and to all other partners

entitled to notice under section 6223.   See supra note 4.    At the

conclusion of the partnership-level examination, the Commissioner

must send the TMP and all notice partners an FPAA detailing any

adjustments made to the Form 1065, U.S. Return of Partnership

Income.   Sec. 6223(a)(2).   Within 90 days of the date the FPAA is

mailed to the TMP, the TMP may contest the FPAA by filing a

petition in the Tax Court, the District Court for the district in

which the partnership’s principal place of business is located,

or the Court of Federal Claims.   Sec. 6226(a).   The court in

which jurisdiction is established has jurisdiction to review all

partnership items for the partnership year to which the FPAA




     18
      A nonpartnership item is defined as an item which is not a
partnership item. Sec. 6231(a)(4). Administrative and judicial
proceedings regarding nonpartnership items are not conducted at
the partnership level. See secs. 6221, 6230(a).
     19
      Under TEFRA a partnership must have a TMP who is either
appointed by the partnership or determined in accordance with
statutory and regulatory requirements. Sec. 6231(a)(7).
                                - 17 -

relates and to review the allocation of such items among the

partners.    Sec. 6226(f).

     The Commissioner is prohibited from assessing a deficiency

attributable to the adjustment of a partnership item until the

partnership-level proceeding is completed.      Sec. 6225.   If the

TMP does not file a petition in the Tax Court, the Commissioner

cannot assess any deficiency attributable to the adjustment of a

partnership item until 150 days after the mailing of the FPAA to

the TMP.    Sec. 6225(a)(1).   If the TMP files a petition in the

Tax Court within the 150-day period, the Commissioner is

prohibited from assessing any deficiency attributable to

partnership item adjustments until the decision of the Tax Court

becomes final.    Sec. 6225(a)(2).20

     Section 6229(a) sets forth the period within which the

Commissioner may assess any deficiency that is attributable to

the adjustment of a partnership item.      It provides that the

period for assessment shall not expire sooner than 3 years after

(1) the date the partnership tax return was filed or (2) the due

date of the partnership tax return (determined without regard to

extensions), whichever is later.       See also Rhone-Poulenc

Surfactants and Specialties, L.P. v. Commissioner, 114 T.C. 533,

542 (2000).    Under section 6229(d) the 3-year period described in



     20
      The finality of a Tax Court decision is determined under
sec. 7481.
                               - 18 -

section 6229(a) is suspended for the 90-day period during which

an action may be brought under section 6226.    Additionally, if a

petition is filed challenging the FPAA under section 6226, the

period within which an assessment may be made is suspended until

the decision of the court becomes final, plus 1 year.    Sec.

6229(d).

     The period for assessment mentioned above continues to apply

as long as an item remains a partnership item.    See sec.

6229(f)(1).   Section 6231(b), however, lists several ways in

which a partnership item may be converted into a nonpartnership

item during a partnership-level proceeding.    Most relevant to

this case, a partnership item converts into a nonpartnership item

as of the date the Secretary or the Attorney General (or his

delegate) “enters into a settlement agreement with the partner

with respect to such items”.   Sec. 6231(b)(1)(C).   If a

partnership item converts into a nonpartnership item under

section 6231(b)(1)(C), section 6229(f) provides that the period

for assessing tax with respect to the converted item expires no

sooner than 1 year after the date the item becomes a

nonpartnership item.21

     Respondent contends that petitioners did not execute a

settlement agreement under section 6231(b)(1)(C) and that



     21
      The period under sec. 6229(f) can be extended by
agreement. Sec. 6229(f)(1).
                               - 19 -

petitioners remained a party to the Greenwich litigation under

section 6226(c) until the Tax Court rendered its final decision.

Thus, respondent argues, he was prohibited by section 6225(a)(2)

from assessing petitioners’ tax liability until the date the

Court’s order and decision became final.    Respondent contends

that he timely assessed petitioners’ tax liability within the

period allowed by section 6229(a) and (d) after the Court’s

decision became final.

     Petitioners assert that the relevant partnership items

converted to nonpartnership items under section 6231(b)(1)(C) by

means of a settlement agreement between Mr. Mathia and

respondent.   Petitioners argue that Mr. Mathia reached a

settlement agreement with respondent on or about September 30,

1991, through correspondence exchanged between Mr. Lerner,

Greenwich’s counsel, and respondent.    Alternatively, petitioners

argue that Mr. Mathia and respondent entered into a settlement

agreement when respondent’s attorney signed the Greenwich

stipulation on August 30, 2001.    A finding that respondent

reached a section 6231(b)(1)(C) settlement agreement with Mr.

Mathia in either circumstance would trigger the application of

the provision contained in section 6229(f) and make respondent’s

assessments untimely.    Accordingly, we must determine what

constitutes a settlement agreement for purposes of section
                                - 20 -

6231(b)(1)(C), and we must then decide whether Mr. Mathia and

respondent entered into such an agreement.

     D.   Settlement Agreements Under Section 6231(b)(1)(C)

     A controversy before this Court may be settled by agreement

between the parties.     Dorchester Indus. Inc. v. Commissioner, 108

T.C. 320, 329 (1997), affd. without published opinion 208 F.3d

205 (3d Cir. 2000).     The term “settlement agreement”, however, is

not defined in the Internal Revenue Code, and section

6231(b)(1)(C) does not provide any detail as to what constitutes

a settlement agreement for purposes of converting a partnership

item into a nonpartnership item.    Because a settlement is a

contract, however, courts generally apply principles of contract

law to determine whether a settlement has been reached.    See

Dorchester Indus. Inc. v. Commissioner, supra at 330; Robbins

Tire & Rubber Co. v. Commissioner, 52 T.C. 420, 435-436,

supplemented by 53 T.C. 275 (1969).

     A settlement agreement can be reached through offer and

acceptance made by letter, or even in the absence of a writing.

Dorchester Indus. Inc. v. Commissioner, supra at 330.     Settlement

of an issue before the Court does not require the execution of a

closing agreement under section 7121, or any other particular

method or form.   Id.    Settlement agreements are effective and

binding once there has been an offer and an acceptance; filing
                                 - 21 -

the agreement with the Court as a stipulation is not required for

the agreement to be effective and binding.        Id. at 338.

     Under TEFRA, a settlement agreement entered into by the TMP

will generally bind a nonnotice partner if the settlement

agreement states that the agreement is binding on the nonnotice

partner.   Sec. 6224(c)(3)(A).    If a partner wants to ensure that

a settlement agreement entered into by the TMP will not be

binding on him, the partner can file a statement with the

Secretary providing that the TMP does not have the authority to

enter into a settlement agreement on that partner’s behalf.      Sec.

6224(c)(3)(B).

     As we discussed above, petitioners argue that Mr. Mathia

entered into a section 6231(b)(1)(C) settlement agreement with

respondent on two separate occasions.     We shall examine the

evidence and circumstances surrounding each occasion to decide

whether Mr. Mathia entered into a section 6231(b)(1)(C)

settlement agreement with respondent as petitioners contend.

           1.    Correspondence Between Parties

     Petitioners argue that Mr. Mathia entered into a section

6231(b)(1)(C) settlement agreement with respondent in September

1991.   According to petitioners, respondent extended an offer to

settle in September 1991, which Mr. Smith, Greenwich’s TMP,

accepted on or about September 30, 1991.     Petitioners rely upon a

series of letters from Mr. Lerner to all of the partners
                             - 22 -

in the Swanton Partnerships as proof that the settlement

agreement existed:

     (1) A September 19, 1991, letter advising all partners in

the Swanton Partnerships to “accept the Government’s settlement

offer which was communicated to us this week”;

     (2) a November 8, 1991, letter indicating that the offer

communicated in the September 19, 1991, letter had been accepted

by 19 of the 20 Swanton TEFRA partnerships (including Greenwich).

The letter stated that the cases had been settled, and that only

the preparation of decision documents and closing agreements

memorializing the terms of the settlement remained outstanding;

     (3) a January 10, 1992, letter from Mr. Lerner to respondent

inquiring about respondent’s progress in implementing the

settlement; and

     (4) a March 13, 1992, letter referencing the settlement that

occurred in 1991 and informing the partners that the settlement

was being finalized.

     As further proof that Mr. Mathia and respondent entered into

a settlement agreement in September 1991, petitioners rely on a

series of letters from respondent:

     (1) A letter dated January 14, 1992, in which respondent’s

attorney informed Mr. Lerner that he was appointing an attorney

to effect the settlement of the Swanton TEFRA Partnerships;
                              - 23 -

     (2) a letter dated in October 1992 that was received by

Zapruder & Odell on October 26, 1992, in which respondent’s

attorney stated that “we agreed to enter into the settlement

agreement” on the basis that the TMP for each partnership was

settling the case on behalf of all partners;

     (3) a letter dated April 9, 1993, in which respondent’s

attorney listed the “terms on which we agreed on September 30,

1991”;

     (4) a letter dated June 11, 1993, that discussed “terms of

settlement” and other “computational issues” affecting the

settlement process; and

     (5) a letter dated September 3, 1993, again discussing the

“terms of the settlement” and other various issues pertaining to

the settlement.

     Although the above-described correspondence confirms that

Greenwich and respondent reached an agreement in 1991 to enter

into a settlement of the partnership-level proceeding, we remain

unconvinced that the agreement was sufficiently fleshed out in

1991 to constitute a binding settlement agreement at that time.

The agreement in principle that was reached in 1991 set forth the

parameters of a settlement, but the correspondence described

above reflects that negotiations continued between respondent and

the attorney representing the Swanton TEFRA partnerships to at

least September 3, 1993.   Moreover, the correspondence indicates
                              - 24 -

that the execution of a decision document resolving the

partnership litigation depended upon the fulfillment of certain

conditions such as the TMP’s ability to represent that all

partners consented to the settlement.22   Implementing and

finalizing the proposed settlement required the collection and

analysis of detailed information, the preparation of calculations

and agreements, and in some cases, the execution of closing

agreements by individual partners.

     Even if we assume, however, that respondent and the

Greenwich TMP entered into a binding settlement agreement to

resolve the partnership litigation in 1991, we would still

conclude that agreement did not qualify as a settlement agreement

between a partner and the Secretary within the meaning of section

6231(b)(1)(C).   The basis for our conclusion is set forth below.

     Section 6231(b)(1)(C) refers only to settlement agreements

reached between the Secretary or the Attorney General (or his

delegate) and a partner.   Section 6231(b)(1)(C) does not contain

any reference to an agreement between the Secretary and a TMP

with respect to a partnership-level proceeding.   The wording of



     22
      Among other things, the settlement of the partnership-
level proceeding was conditioned upon the TMP’s executing a
stipulation consenting to the entry of decision under Rule
248(a), which, when filed with the Court, would be binding on all
parties, including individual partners. Under Rule 248(a), the
TMP’s signature on the stipulation “constitutes a certificate by
the tax matters partner that no party objects to entry of
decision.”
                               - 25 -

section 6231(b)(1)(C) presents us with the real issue at hand:

does a settlement agreement between the Secretary and a TMP

resolving a partnership-level proceeding under sections 6221-6231

constitute a settlement agreement with a partner with respect to

the partnership items of the partner under section 6231(b)(1)(C)?

     In Crnkovich v. United States, 41 Fed. Cl. 168 (1998), affd.

per curiam 202 F.3d 1325 (Fed. Cir. 2000), which also involved

Swanton TEFRA partnerships, the U.S. Court of Federal Claims

examined two agreements reached in two separate actions.23    In

the first action, the court held that the taxpayer-partners

entered into a section 6231(b)(1)(C) settlement agreement when

they executed a Form 906, Closing Agreement on Final

Determination Covering Specific Matters.    Id. at 175.   In the

second action, the court held that a stipulation of settlement

entered into between individual taxpayer-partners and the

Commissioner constituted a settlement agreement under section

6231(b)(1)(C).   Id. at 178.   In reaching both conclusions, the

court focused on the intent of the parties to enter into a

binding, conclusive agreement governing the settlement of

disputed partnership items.    Id. at 173, 179.   The court also

examined the role that a section 6231(b)(1)(C) settlement



     23
       Two of a total of five consolidated actions were before
the court on cross-motions for summary judgment. Crnkovich v.
United States, 41 Fed. Cl. 168, 169 (1998), affd. per curiam 202
F.3d 1325 (Fed. Cir. 2000).
                             - 26 -

agreement is intended to serve under the TEFRA partnership

provisions:

     At the time the IRS entered the Form 906 agreement, it
     faced competing incentives in determining how best to
     handle the partnership tax issues presented for the
     * * * [taxpayers’] post-1982 tax years. On the one
     hand, as reflected by the TEFRA partnership provisions,
     it ordinarily is efficient for the IRS to make the
     determination as to the tax treatment of partnership
     items at the partnership level. On the other hand,
     because the IRS was in the process of negotiating with
     the * * * [taxpayers] on an individual partner level
     with respect to pre-TEFRA tax years, there were
     potential efficiencies in also dealing with the * * *
     [taxpayers] individually with respect to post-TEFRA tax
     years. In the Form 906 agreement, the IRS resolved
     these competing incentives by deciding to deal with the
     * * * [taxpayers] individually and apart from any
     partnership-level determinations. For certain tax
     issues, the bilateral agreement establishes the terms
     that control the * * * [taxpayers’] personal tax
     liability without providing an exception in the event
     of a contrary resolution of the same tax issues at the
     partnership level. Hence, in entering the Form 906
     agreement, the IRS chose to forego the advantages of
     making its determinations at the partnership level and
     opted instead to deal with the * * * [taxpayers]
     individually with respect to the tax issues addressed
     in the Form 906 agreement. Entering into a “settlement
     agreement” under I.R.C. § 6231(b)(1)(C) is a statutory
     method of exercising such a choice. [Id. at 174-175;
     emphasis added.]

     The court’s analysis in Crnkovich illustrates an important

distinction between a settlement agreement reached at the

partnership level by a partnership’s TMP and a settlement

agreement reached directly with an individual partner.   When a

partner enters into a settlement agreement individually, as each

taxpayer did in Crnkovich v. United States, supra, he removes

himself from the partnership proceeding and allows the
                              - 27 -

Commissioner to resolve his tax liability on an individual basis.

In such a case the disputed partnership items are no longer more

appropriately determined at the partnership level, and section

6231(b)(1)(C) operates to convert the partner’s partnership items

to nonpartnership items.   This conversion allows the Commissioner

to proceed with assessment and collection against the individual

partner under section 6229(f) in accordance with the terms of the

settlement, free of the TEFRA-imposed restrictions on assessment

mentioned above.   See sec. 6225.

     The 1991 agreement reached by respondent and Mr. Lerner on

behalf of the Swanton TEFRA partnerships outlined in principle

the terms that would govern a settlement of the partnership

litigation involving 19 of 20 Swanton TEFRA partnerships.    It did

not reflect an agreement to settle any individual partner’s

liability resulting from adjustments to partnership items outside

of the partnership-level proceeding.   Consequently, the agreement

did not operate to remove Mr. Mathia or any other partner from

the partnership-level proceeding.   Instead, the agreement started

a process that culminated with the filing of the Greenwich

stipulation and the Court’s entry of decision.   After the

decision resolving the partnership litigation became final,

respondent adjusted petitioners’ tax liability in accordance with

the decision resolving the partnership litigation as required and

permitted by sections 6221-6231.
                                - 28 -

     We conclude on the record before us that the agreement

reached between respondent and Mr. Lerner was an agreement

relating to the TEFRA partnership proceeding on behalf of the

Swanton TEFRA partnerships (including Greenwich) and was not an

agreement between respondent and Mr. Mathia that operated to

convert Mr. Mathia’s partnership items into nonpartnership items

as contemplated by section 6231(b)(1)(C).

          2.     Greenwich Stipulation

     Petitioners also argue that Mr. Mathia entered into a

section 6231(b)(1)(C) settlement agreement on August 30, 2001,

when respondent countersigned the Greenwich stipulation.

Respondent disagrees, arguing that the Greenwich stipulation is

not a settlement agreement of the type described in section

6231(b)(1)(C).     According to respondent, the Greenwich

stipulation offered by petitioners does not use the phrase “terms

of settlement”, addresses issues solely at the partnership level,

and functions only to settle the partnership-level proceeding.

     We agree with respondent.    As with the 1991 agreement, the

adjustments to partnership items in the Greenwich stipulation

were adjustments to be made at the partnership level.       Under Rule

248(a), Mr. Smith agreed to the adjustments to the disputed

partnership items on behalf of Greenwich partners (including Mr.

Mathia) who did not enter individual closing agreements.      The

adjustments agreed upon were made to items reported on
                              - 29 -

Greenwich’s partnership return, and the stipulation made no

reference to the individual liability of Greenwich partners.

Thus, while the stipulation was executed by Mr. Smith in his

capacity as the TMP who possessed the necessary authority to bind

Mr. Mathia and/or his estate, the stipulation reflected an

agreement regarding the treatment of partnership items that was

reached by and with the partnership.   The stipulation did not

qualify as “a settlement agreement with the partner” with respect

to partnership items within the meaning of section 6231(b)(1)(C).

A settlement agreement under section 6231(b)(1)(C) operates to

convert a partner’s distributive share of partnership items to

nonpartnership items and enables the Commissioner to assess that

partner’s deficiency without regard to the restriction on

assessment set forth in section 6225(a)(2).   Respondent was

prohibited by section 6225(a)(2) from assessing deficiencies

attributable to the Greenwich partnership items until this Court

had entered a decision in the partnership proceeding and that

decision had become final under section 7481.

     We conclude that neither Mr. Mathia nor his estate entered

into a settlement agreement with respondent that qualified as a

settlement agreement with a partner within the meaning of section

6231(b)(1)(C).   Accordingly, the disputed partnership items were

not converted to nonpartnership items, and the period for

assessment under section 6229(d) remained open for the
                               - 30 -

assessments at issue here.    Under section 6225(a)(2), respondent

was restricted from assessing deficiencies attributable to the

partnership item adjustments set forth in the Greenwich

stipulation until April 17, 2002, the day the Court’s decision

became final.24   Under section 6229(d), respondent’s January 27,

2003, assessment is timely because it occurred within 1 year of

the decision’s becoming final.   We hold, therefore, that

respondent is not barred by section 6229(f)(1) from assessing and

collecting petitioners’ unpaid tax liability.

II.   Abatement of Interest

      Section 6601(a) provides, in general, that if any amount of

tax imposed by the Code is not paid on or before the last date

prescribed for payment, interest on such amount must be paid for

the period from such last date to the date paid at the

underpayment rate established under section 6621.   Section

6611(a) similarly provides that interest must be allowed and paid

on any overpayment in respect of any internal revenue tax at the

overpayment rate established under section 6621.    Section 6621(d)

provides for the elimination of interest on overlapping periods




      24
      Under sec. 7481 decisions of the Court shall become final
upon the expiration of the time allowed for filing a notice of
appeal if no such notice has been duly filed within such time.
Under sec. 7483 a taxpayer has 90 days to file a notice of appeal
after the decision of the Court is entered.
                                - 31 -

of tax overpayments and underpayments.25       To the extent that for

any period interest is payable and allowable on equivalent

underpayments and overpayments by the same taxpayer, the net rate

of interest under section 6621 on such amounts is zero for such

period.   Sec. 6621(d).

     Section 6404(e), as it applies to this case,26 provides in

pertinent part:

          SEC. 6404(e). Assessments of Interest
     Attributable to Errors and Delays by Internal Revenue
     Service.--

                (1) In general.–-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 * * *

                  *    *    *    *    *    *      *

           the Secretary may abate the assessment of all or
           any part of such interest for any period. * * *




     25
      However, sec. 6621(d) generally is effective with respect
to interest for periods beginning after July 22, 1998. RRA 1998
sec. 3301, 112 Stat. 741.
     26
      In 1996 Congress amended sec. 6404(e)(1) to permit
abatement of interest for unreasonable error or delay in
performing a ministerial or managerial act. Taxpayer Bill of
Rights 2, Pub. L. 104-168, sec. 301, 110 Stat. 1457 (1996). The
amendments to sec. 6404(e)(1), however, apply only to interest
accruing with respect to deficiencies or payments for tax years
beginning after July 30, 1996. Id. Accordingly, the amendments
do not apply in this case.
                                - 32 -

A ministerial act is 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 reviews by

supervisors, have taken place.    Sec. 301.6404-2T(b)(1), Temporary

Proced. & Admin. Regs., 52 Fed. Reg. 30163 (Aug. 13, 1987).27         A

decision concerning the proper application of Federal tax law is

not a ministerial act.   Id.    The Secretary will not grant an

abatement of interest if a significant aspect of the delay is

attributable to the taxpayer.    Sec. 6404(e)(1).

     When Congress enacted section 6404(e), it did not intend the

provision to be used routinely 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.       Under

section 6404(h)(1), we have jurisdiction to determine whether the

Commissioner abused his discretion in denying a taxpayer’s

request for abatement of interest.       Because the Commissioner’s

abatement authority involves the exercise of discretion, however,

we must give due deference to the Commissioner’s determination.



     27
      Because the taxes in question are for years before 1996,
the temporary regulations (rather than the final ones) are
applicable, though the same in substance insofar as relevant
here.
                               - 33 -

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

Commissioner, 91 T.C. 1079, 1082 (1988).   In order to prevail, a

taxpayer must prove that the Commissioner abused his discretion

by exercising it arbitrarily, capriciously, or without sound

basis in fact or law.   Woodral v. Commissioner, supra at 23;

Mailman v. Commissioner, supra at 1084; see also sec. 6404(h)(1);

Rule 142(a).

     Petitioners contend that they are entitled to an abatement

of interest for three periods beginning on December 27, 1984,

when petitioners allege respondent issued the first Greenwich

NBAP, to August 25, 2003.28   Our analysis of each period is set

forth below.

     A.   Period From December 27, 1984, to August 3, 1990

     Petitioners assert that respondent issued NBAP’s with

respect to Greenwich’s 1983 and 1984 tax years which Greenwich

received on December 27, 1984, and March 16, 1987, respectively,

and that respondent took an unreasonable amount of time by not

providing a further response until August 3, 1990, when

respondent issued to Greenwich the FPAA for tax years 1982, 1983,

and 1984.   Petitioners allege that the interest that accrued

during this period was attributable to delays resulting




     28
      Petitioners erroneously contend that Aug. 25, 2003, was
the date respondent issued the notice of intention to levy to
Greenwich.
                               - 34 -

from the uncoordinated involvement of multiple IRS districts and

that the lack of coordination was a ministerial act.

     Petitioners’ argument is not supported by the record.    In

Beagles v. Commissioner, T.C. Memo. 2003-67, a case also

involving the tax liability of a partner in a Swanton

partnership, we set forth some of the history behind the Swanton

partnership litigation, and we held that the Commissioner was not

erroneous or dilatory in performing a ministerial act between

April 15, 1984, and May 8, 1992.   During this period the

Department of Justice conducted a criminal investigation of

Norman Swanton (Mr. Swanton), the individual behind the formation

and promotion of the Swanton coal programs.    Id.   During the

investigation civil proceedings were suspended in accordance with

established IRS policy.29   After the period of limitations for

prosecution expired, the criminal investigation of Mr. Swanton

terminated.   In 1988 litigation involving the pre-TEFRA Swanton

partnerships commenced in this Court.   That litigation continued

until approximately September 1993.30   Id.   During the pendency


     29
      The delay of a civil matter until the resolution of a
related criminal matter is a longstanding policy of the IRS.
Taylor v. Commissioner, 113 T.C. 206, 212 (1999) (citing
Badaracco v. Commissioner, 693 F.2d 298, 302 (3d Cir. 1982),
revg. T.C. Memo. 1981-404, affd. 464 U.S. 386 (1984)), affd. 9
Fed. Appx. 700 (9th Cir. 2001).
     30
      Several test cases were tried in 1992, and an opinion was
filed in 1993 in Kelley v. Commissioner, T.C. Memo. 1993-495
(taxpayers not entitled to deductions claimed in relation to
                                                   (continued...)
                              - 35 -

of the pre-TEFRA partnership litigation, respondent made a

managerial decision to suspend proceedings involving the Swanton

TEFRA partnerships.

     The mere passage of time during the litigation phase of a

dispute does not establish an error or delay by the Commissioner

in performing a ministerial act because decisions about how to

proceed in the litigation phase of a case necessarily involve

discretion.   Lee v. Commissioner, 113 T.C. 145, 150-151 (1999).

In the context of the Swanton partnership litigation, we have

uniformly held that decisions made by the IRS regarding the

management of the Swanton project were not ministerial acts.

See, e.g., Jaffe v. Commissioner, T.C. Memo. 2004-122, affd. 175

Fed. Appx. 853 (9th Cir. 2006); Dadian v. Commissioner, T.C.

Memo. 2004-121; Deverna v. Commissioner, T.C. Memo. 2004-80;

Beagles v. Commissioner, supra.




     30
      (...continued)
Swanton coal programs).   As we stated in Beagles v. Commissioner,
T.C. Memo. 2003-67:

     The Court’s practice of selecting test cases and
     holding other cases in abeyance pending the resolution
     of the test cases was among the management tools
     adopted to deal with the large number of cases. It was
     not feasible to litigate simultaneously hundreds of
     cases involving substantially similar issues. Here,
     respondent’s counsel turned to the group of TEFRA
     cases, including petitioner’s partnership, as soon as
     the trial of the Swanton test cases concluded in 1992.
     Prior to that time, the delays are explained by the
     complexities and burdens of managing the cases.
                              - 36 -

     Respondent’s decisions and actions during this period were

managerial and involved the exercise of discretion.    We conclude

that respondent did not abuse his discretion by denying

petitioners’ request for abatement of interest for the period

from December 27, 1984, to August 3, 1990.

     B.   November 8, 1991, to August 30, 2001

     During this period, petitioners claim, respondent was

dilatory in processing the closing agreements and Rule 248(a)

decision document necessary to consummate a settlement of the

Greenwich partnership litigation after the parties reached an

agreement in principle in or around November 1991.    Petitioners

argue that respondent took an unreasonable amount of time (nearly

4 years) to issue the decision document to Greenwich on July 3,

1995, and an even more unreasonable amount of time (nearly 5

years) to countersign the decision document on August 30, 2001,

after Mr. Lerner had executed it on behalf of the partnership and

returned it to respondent in September 1996.     Petitioners argue

that the processing of these documents was a ministerial act and

that respondent’s delay in finalizing the Greenwich settlement

entitles petitioners to an abatement of interest that accrued

during this period.

     The record with which we are presented confirms that the

1991 agreement presented a challenge that involved the collection

of information and the preparation of documents for 19 Swanton
                              - 37 -

TEFRA partnerships and each of the partners.    Nevertheless, we

must examine the record for evidence pertaining to the manner in

which respondent implemented and finalized the Greenwich

settlement.

     The notice of determination denying petitioners’ abatement

request contains no explanation of what transpired from

November 8, 1991, to August 30, 2001.    It simply states that

respondent did not find any errors or delays that merit the

abatement of interest.   Consequently we review the record

stipulated by the parties for what it tells us about the

Greenwich settlement process from November 8, 1991, to August 30,

2001.

     The record reveals the following.   In approximately

September 1991 respondent’s attorney and Greenwich’s attorney

reached an agreement in principle to settle the TEFRA partnership

litigation pending in this Court.   On July 3, 1995, respondent’s

attorney mailed to Greenwich’s counsel the decision document and

the closing agreements for execution by counsel, Greenwich’s TMP,

and the partners named in the closing agreements.    On

September 25, 1996, Greenwich delivered the decision document

signed by the TMP and Greenwich’s counsel to respondent.     On July

17 and November 7, 1996, closing agreements were mailed to

respondent’s counsel, Ms. Sullivan.    On February 27, 2001, Ms.

Sullivan sent another decision document to Greenwich’s counsel
                              - 38 -

and requested that it be executed.     On August 30, 2001, a

representative of respondent countersigned the decision document

and submitted it to this Court.

     The stipulated record reveals the following gaps in the

processing of the Greenwich paperwork:     (1) An approximately 4-

year gap between the 1991 agreement and July 3, 1995, when the

decision document and the closing agreements were mailed to

Greenwich, (2) an approximately 1-year gap between July 3, 1995,

and November 7, 1996, the last date that the stipulated record

shows closing agreements were mailed to respondent’s counsel, and

(3) an approximately 5-year gap between November 8, 1996, and

August 30, 2001, when the decision document was countersigned by

respondent.   We examine each of the gaps to decide whether

respondent abused his discretion regarding the abatement of

interest.   In making the examination, we assume that the

stipulated record includes the administrative file that was

available to respondent when he made his decision not to abate

interest.

     With respect to the first gap, the stipulated record

establishes that after the 1991 agreement was reached, the

parties to the Greenwich partnership litigation gathered and

exchanged information necessary to identify the Greenwich

partners who were required to execute closing agreements, and

respondent prepared necessary computations as well as the
                              - 39 -

Greenwich decision document and closing agreements.   That process

was complicated and took time.   Although the approximately 4-year

gap was substantial, we see nothing in the stipulated record that

supports a conclusion that the first gap was the result of

unreasonable delay by respondent in performing a ministerial act.

Rather, the stipulated record reflects that the process of

implementing the settlements of the Swanton TEFRA partnerships

was a managerial nightmare requiring cooperation over an extended

period to prepare necessary calculations and paperwork and to

ensure that the TMPs could satisfy respondent’s requirement that

they certify no partner objected to the settlement of the

partnership actions.   Petitioners’ complaint here is grounded in

a concern about the management of the settlement process, but

section 6404(e) as then in effect does not permit us to abate

interest for managerial decisions.

     With respect to the second gap, the stipulated record

indicates that respondent mailed the decision document and the

closing agreements to Greenwich, and Greenwich took approximately

1 year to return the executed decision document and the closing

agreements to respondent.   We see nothing in the stipulated

record that supports a conclusion that the second gap was the

result of any unreasonable delay by respondent in performing a

ministerial act.
                                - 40 -

     The third gap of approximately 5 years requires a different

conclusion, however.   The stipulated record is substantial and

includes paperwork generated by respondent as well as

correspondence between respondent and Greenwich.    The stipulated

record reflects that Greenwich delivered an executed decision

document to respondent’s counsel on September 25, 1996, and that

Greenwich also mailed signed closing agreements to respondent on

July 17 and November 7, 1996.    Although the stipulated record

does not clearly reflect that all of the Greenwich closing

agreements were included in the two mailings, there is no

correspondence in the administrative record to suggest that any

of the required closing agreements were missing or that

Greenwich’s TMP and attorneys were dilatory in any way.

Consequently, we infer from the documents that no later than

November 1996 Greenwich had returned the necessary documents to

respondent’s counsel and that the only steps necessary to

consummate the Greenwich settlement were the ministerial acts of

countersigning the decision document and the closing agreements

and filing the decision document with the Court.

     The stipulated record, however, contains no credible

explanation of the 5-year gap between the delivery of closing

agreements on November 7, 1996, and the countersigning on August

30, 2001, of the decision document, which was filed with the

Court as a stipulation of settlement on August 31, 2001.    In
                             - 41 -

addition, the stipulated record reflects that on February 27,

2001, respondent’s counsel sent a second decision document to

Greenwich’s counsel that was identical to the first decision

document executed by Greenwich in 1996, a development that

suggests that respondent may have lost the original executed

decision document.

     In Jacobs v. Commissioner, T.C. Memo. 2000-123, we addressed

a situation where the basis for the Commissioner’s determination

not to abate interest had not been clearly explained either in

the final determination or at trial.   We noted that an agency

must cogently explain why it has exercised its discretion in a

given manner, see Motor Vehicle Manufacturers Association of the

United States v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 48-

49 (1983), and that an agency’s exercise of discretion that is

not adequately explained is an abuse of discretion because it is

without rational explanation, see Estate of Gardner v.

Commissioner, 82 T.C. 989, 1000 (1984).   In Jacobs v.

Commissioner, supra, we also stated the following:

          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
                                - 42 -

     of the abatement request and about the inquiry in
     response to the request. * * *

     We have a similar dilemma in this case.     The notice of

determination contains no explanation of how respondent exercised

his discretion and does not recite any facts in support of the

exercise of that discretion.     Although the stipulated record

provides many of the relevant facts, it fails to provide critical

information that only respondent would have.     For example, the

stipulated record does not establish the date when all of the

closing agreements were received by respondent’s attorneys or

indicate what respondent did with the closing agreements he

received in 1996.     The only credible evidence in the record31

regarding respondent’s receipt of closing agreements establishes

that closing agreements were sent to respondent in July and

November 1996.     In the absence of contrary evidence, we infer

that respondent had the closing agreements no later than November

1996.     The stipulated record does not explain the delay on the

part of respondent in countersigning and filing the Greenwich

decision document.


     31
      Although the notices of determination issued under secs.
6320 and 6330 contain a conclusory statement to the effect that
the delay was attributable to Greenwich, we conclude that the
statement is not credible because there is nothing in the
stipulated record other than this statement to support a finding
that any part of the delay was attributable to Greenwich. In
fact the credible evidence in the record is to the contrary.
Greenwich requested prompt processing of the proposed settlement
and promptly returned the executed decision document and the
closing agreements.
                               - 43 -

     In Dadian v. Commissioner, T.C. Memo. 2004-121, also a

Swanton TEFRA partnership case, we found that the Commissioner’s

task of countersigning the closing agreement was a ministerial

act and that because the Commissioner took an unreasonable amount

of time to countersign, the taxpayer was entitled to abatement of

interest.

        The present case, like the Dadian case, involved the

ministerial act of countersigning the relevant settlement

document.    Although Mr. Mathia did not execute an individual

closing agreement as the taxpayer did in Dadian, the processing

of the Greenwich settlement as to Mr. Mathia and other Greenwich

partners depended upon the execution of closing agreements by

limited partners and by respondent, and upon the execution of a

decision document by Greenwich and respondent.    The record

reflects that respondent prepared and mailed out the relevant

decision document and closing agreements in 1995 and received the

signed documents in 1996.    However, the Greenwich decision

document was not countersigned and filed with this Court until

2001.    The delay in performing this ministerial act is not

explained in the record.

     Because the delay in countersigning the decision document is

not explained by credible evidence in the stipulated record, we

conclude that respondent abused his discretion in refusing to
                               - 44 -

abate interest for the period from November 8, 1996, to

August 30, 2001.

     C.    August 30, 2001, to August 25, 2003

     Petitioners argue that they are entitled to abatement of

interest accrued from August 30, 2001, the date the Greenwich

stipulation was signed, to August 25, 2003, the date they allege

respondent issued the notice of intent to levy.32   Petitioners

assert that the issuance of the notice is a ministerial act which

respondent was dilatory in performing.

     Respondent could not assess income tax liabilities of

individual partners bound by the decision entered in the

Greenwich partnership litigation until the decision became final.

See sec. 6229.   The Court’s order and decision in the Greenwich

litigation became final on April 17, 2002.   Under section

6229(d)(2), respondent had 1 year to assess the tax resulting

from adjustments in the Greenwich stipulation.   Respondent

assessed petitioners’ liabilities for 1982, 1983, and 1984 on

January 27, 2003, less than 1 year after the decision became

final.33   The stipulated record does not reveal any unreasonable


     32
      We have found that respondent issued the notice of intent
to levy on Feb. 10, 2004.
     33
      In several of the Swanton TEFRA partnership cases that we
have decided, we found that some of the Internal Revenue
Service’s files were destroyed as a result of the destruction of
the World Trade Center on Sept. 11, 2001. See, e.g., Dadian v.
Commissioner, T.C. Memo. 2004-121; Beagles v. Commissioner, T.C.
                                                   (continued...)
                                - 45 -

or unexplained delay in performing a ministerial act for this

part of the period.

     For the remaining period, January 28, 2003, through February

10, 2004, the stipulated record shows that respondent mailed

required notices of the assessments to petitioners, conducted an

investigation to identify levy sources and evaluate whether a

levy was appropriate, issued a notice and demand for payment to

petitioners, and made an administrative decision to issue a

notice of intent to levy.     The process used by the IRS to decide

whether to proceed with collection by levy requires managerial

evaluation and the exercise of judgment and does not consist

solely of ministerial acts.     That process was followed in this

case.     Because we cannot identify any unreasonable delay in

performing a ministerial act during this period, we sustain

respondent’s determination as to the entirety of this period.

     We conclude that respondent did not abuse his discretion by

denying petitioners’ request for interest abatement for the

period from August 30, 2001, to August 25, 2003.

     D.     Section 6621(d)

     Lastly, petitioners request abatement of interest resulting

from application of the “global netting” concept of section



     33
      (...continued)
Memo. 2003-67. The stipulated record, however, does not
establish whether any of the Greenwich partnership litigation
files were also destroyed on Sept. 11, 2001.
                               - 46 -

6621(d).   Petitioners assert that the termination of the

Greenwich partnership in 1987 released Mr. Mathia from his share

of certain partnership debt, resulting in $234,975 of income

being reported on petitioners’ 1987 income tax return.    According

to petitioners, this figure represents the amount by which Mr.

Mathia’s cumulative deductions with respect to Greenwich in 1982,

1983, and 1984 exceeded his cash outlay for his interest in

Greenwich.   Petitioners argue that they should be allowed, for

interest abatement purposes only, to reverse the income reported

in 1987 in connection with the disallowance of the related

deductions in 1982, 1983, and 1984.     Petitioners further allege

that reversal of the 1987 income results in an overpayment of

$20,233 for that year and that interest on this overpayment

should be allowed to offset and “zero out” the interest accruing

on the 1982, 1983, and 1984 deficiencies.

     Petitioners’ argument is without merit for several reasons.

First, section 6621(d) generally is effective for interest for

periods beginning after July 22, 1998.    Internal Revenue Service

Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3301,

112 Stat. 741.   Second, although a special rule was enacted that

mitigates the effective date provision described above for

periods beginning before July 22, 1998, petitioners do not appear

to satisfy its requirements.   Id. sec. 3301(c)(2), 112 Stat. 741,

as amended by Omnibus Consolidated and Emergency Supplemental
                               - 47 -

Appropriations Act, 1999, Pub. L. 105-277, sec. 4002(d), 112

Stat. 2681-906 (1998).   Finally, even if section 6621(d) were to

apply to the periods at issue, for there to be a netting of

overpayment and underpayment interest under section 6621(d) there

must be an overpayment generating interest owed to the taxpayer.

An overpayment begins to accrue interest on the date of payment

of the first amount which is in excess of the tax liability.

Sec. 301.6611-1(b), Proced. & Admin. Regs.   Petitioners never

made an overpayment with regard to their 1987 tax liability.34

Petitioners’ 1987 income tax return reported a tax liability of

$19,473, and respondent assessed additional tax of $23,698 on

May 3, 1993.   Petitioners paid the full amount of the tax

assessed, plus accrued interest and penalties, and petitioners’

1987 tax account balance is zero.   Because there is no

overpayment, there is no overpayment interest payable to

petitioners.   Respondent properly denied petitioners’ claim for

interest netting.

III. Respondent’s Collection Actions

     The only issues raised with respect to respondent’s

collection actions were the limitations issue and the interest

abatement issue.    We conclude that the requirements of sections


     34
      According to the 1991 agreement, any partner who reported
any debt forgiveness income in 1987 was entitled to file a claim
for refund for the tax paid on that income. Petitioners did not
file a claim for refund with respect to any 1987 debt forgiveness
income.
                              - 48 -

6320 and 6330 have been satisfied and that respondent may proceed

with collection except to the extent set forth in this opinion.

IV.   Conclusion

      We have considered all the other arguments made by

petitioners, and, to the extent not discussed above, conclude

those arguments are irrelevant, moot, or without merit.

      Because we conclude that petitioners are entitled to

interest abatement for the period from November 8, 1996, to and

including August 30, 2001, petitioners’ unpaid liability for

purposes of sections 6320 and 6330 must be recalculated to

reflect our holding.   We shall enter a decision authorizing

respondent to proceed with collection once respondent has abated

interest in accordance with this opinion and has so advised the

Court and petitioners.

      To reflect the foregoing,


                                       An appropriate decision will

                                  be entered.
