                             UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT


                             No. 05-1975



JOHN G. GOETTEE, JR.; MARIAN GOETTEE,

                                           Petitioners - Appellants,

           versus


COMMISSIONER OF INTERNAL REVENUE,

                                              Respondent - Appellee.



Appeal from the United States Tax Court.    (Tax Ct. No. 96-26591)


Argued:   May 26, 2006                      Decided:   July 28, 2006


Before MOTZ, GREGORY, and DUNCAN, Circuit Judges.


Affirmed by unpublished per curiam opinion.


ARGUED: Matthew Joseph McCann, Bethesda, Maryland, for Appellants.
Randolph L. Hutter, UNITED STATES DEPARTMENT OF JUSTICE, Tax
Division, Washington, D.C., for Appellee.     ON BRIEF: Eileen J.
O’Connor, Assistant Attorney General, Richard Farber, UNITED STATES
DEPARTMENT OF JUSTICE, Tax Division, Washington, D.C., for
Appellee.


Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
PER CURIAM:

     Petitioners-Appellants, John and Marian Goettee, appeal the

Order and Decision of the Tax Court denying them abatement of

interest that had accrued on past-due taxes.             The Goettees claim

that the delay in payment was due in large part to the IRS and that

they therefore should not be liable for interest accrual resulting

from that delay.   They also contend that the Tax Court abused its

discretion in refusing to award them reasonable litigation costs in

the action as a prevailing party.

     Because the IRS is not compelled to abate interest for the

periods in question under the applicable statutes and regulations,

and because the Tax Court reasonably acted within its discretion in

refusing to award litigation costs to the Goettees, we Affirm the

Order and Decision of the Tax Court.



                                     I.

     During   September   1981,   the      Goettees    acquired   a   limited

partnership   interest    in   The       Thompson     Equipment   Associates

partnership (“TEA”), a type of shelter that came to be known as a

“Barrister Books” shelter. The IRS subsequently found this type of

shelter to be improper.

     On October 15, 1986, the IRS sent the Goettees a notice of

deficiency.   In it, the IRS made adjustments on account of TEA

items and determined deficiencies and additions to the Goettee’s


                                     2
tax liability for 1978, 1979, 1981, and 1982.           On November 3, 1986,

the Goettees challenged this determination in Tax Court and sought

a redetermination of their tax liabilities for all four years. The

Tax   Court    assigned   the   Goettees’   case   to    a   group   of   cases

collectively referred to as the Barrister Books project. Andrew M.

Winkler served as lead counsel for the IRS in the Barrister Books

cases.     Sometime around 1986, Winkler began extending a uniform

settlement offer to Barrister Books investors by settlement letters

one batch at a time.      Winkler decided not to send a letter to all

Barrister Books investors simultaneously because he felt that it

would be impossible for the IRS to process all of the settlements

at once.      Winkler stopped extending the offer on or about May 16,

1989 because he was waiting for the resolution of Series 115, the

lead case in the Barrister Books litigation project. In the spring

of 1993, after the Series 115 case concluded, Winkler again began

extending settlement offers.        He sent the letters out roughly in

alphabetical order, subject to some exceptions.              For example, if

several investors were represented by a single representative,

Winkler extended the offer to those individual investors at the

same time.

      Although the Barrister Books settlements were complex, the IRS

staffed the matter leanly.          The agency assigned the work to

officers to handle in addition to their normal case load.                 Around

July 1993, the Goettees’ case was assigned, along with about


                                     3
seventy-five other Barrister Books cases, to appeals officer Fran

Rowland    in   the   IRS’s   Cincinnati      office.    Like    other   appeals

officers, Rowland managed multiple priorities while she processed

the settlement of the Barrister Books cases. Cases nearing the end

of   the   limitations   period   and       those   calendared   for   trial   in

Cincinnati and Columbus, Ohio were given a higher priority than the

Barrister Books cases.         Although Rowland's caseload was down by

about half in the spring of 1993, it returned to normal about the

same time that the Barrister Books cases were assigned to her.

Because of the increase in her workload, Rowland did not send

settlement letters to any Barrister Books taxpayers until about

September of 1993.

      The settlement letters (1) stated the terms of the settlement

offer, (2) asked the recipients to submit to Rowland copies of

their canceled checks within 10 days so that she could verify the

recipients' actual cash investment in the partnership, and (3)

stated that upon receipt of the verification information, Rowland

would send to the taxpayer computations which showed the tax

effects of the settlement offer to that taxpayer.

      Once a taxpayer accepted the settlement offer and returned the

signed decision document, Rowland prepared and submitted to her

boss, Paul Becker, an appeals transmittal and case memorandum for

his approval. If Becker approved, he signed the appeals transmittal

and case memorandum and transmitted the settlement documents to


                                        4
Winkler. Winkler then reviewed the format and contents of the

decision documents, signed them, and forwarded them to the Tax

Court for entry of decision.

     On November 24, 1993, Rowland sent the Goettees a settlement

letter. On December 2, 1993, the Goettees returned the verification

information to Rowland.    On October 26, 1994, Rowland mailed the

settlement documents to the Goettees.            They signed the decision

document on November 25, 1994, and mailed it to Rowland on December

14, 1994.   The IRS eventually accepted the settlement and billed

the Goettees for their tax deficiencies.

     The Goettees paid all of the back taxes due, but asked for an

abatement of the interest that had collected on the taxes due,

which amounted to the following amounts:         1978: $65,336.10-- 1979:

$36,456.54--   1981:   $4,689.52--       1982:   $13,243.89.    Following

negotiations between the parties, the IRS decided to abate interest

that had accrued between October 4, 1995 and November 20, 1996

because the Goettees had been given incorrect advice by the IRS

during this time.      The IRS refused to abate the interest that

accrued during any other periods.

     At some point during the negotiations between the parties, the

Goettees also submitted $40,000 to the IRS as part of an Offer in

Compromise (“OIC”) of their interest liability. The IRS eventually

rejected the OIC.




                                     5
     On December 6, 1996, the Goettees filed a timely petition with

the Tax Court challenging the IRS's denial of the majority of their

request for abatement.   The IRS filed a motion for partial summary

judgment, which the Tax Court granted, holding that the statute

under which the Goettees sought relief did not apply to tax year

1978.    Accordingly, the case continued to trial only with respect

to abatement of interest concerning the taxable years 1979, 1981,

and 1982.

     At trial, the Goettees contended that interest abatement was

warranted for two specific periods during which their delay in

payment was attributable to improper action by the IRS:    the 328

day period between December 2, 1993 and October 26, 1994 during

which time the IRS was computing the tax due after it made the

Barrister Books settlement offer to the Goettees, and the 139 day

period between December 14, 1994 and May 2, 1995 during which time

the IRS was processing the Goettees’ signed settlement agreement.1

The Goettees also requested that the Tax Court “order abatement for

unspecified additional periods.”      J.A. at 563.   The Tax Court

ultimately held that the IRS abused its discretion in not abating

interest for the period of January 25 through April 24, 1995.

With respect to all other periods at issue, the Tax Court held that




     1
      At trial, the IRS conceded that abatement of interest for one
period of time - February 25 through April 25, 1995 - was
appropriate.

                                  6
the IRS did not abuse its discretion by not abating interest

assessed against the taxpayers.

     The Goettees filed a motion for reconsideration, which the Tax

Court denied.      In addition, they filed a motion for an award of

reasonable litigation costs as a prevailing party in the amount of

$59,735.09.       The Tax Court also denied this motion.          The Goettees

timely appeal to this court the Tax Court Decision and Order, the

rejection of their motion for reconsideration, and the rejection of

their motion for an award of reasonable litigation costs.



                                      II.

        The   Goettees   first   contend    that   the   Tax   Court   erred   in

granting partial summary judgment to the IRS and dismissing the

Goettees’ claim for interest abatement for tax year 1978 from the

suit.     We reject this contention.

        The Goettees filed their petition with the Tax Court seeking

abatement of interest with respect to tax years 1978, 1979, 1981,

and 1982.      The Tax Court granted partial summary judgment to the

IRS, dismissing the 1978 tax year from the suit.                The Tax Court

held that the Goettees’ claim for abatement of interest sounded

under 26 U.S.C. § 6404(e),2 which only applies to tax years

beginning after 1978.       Tax Reform Act of 1986, Pub. L. No. 99-514,



     2
        All statutory citations are to Title 26 of the United States
Code.

                                       7
§ 1563(b), 100 Stat. 2085, 2762.       The Goettees argue that the Tax

Court erred in not also assessing their claim under § 6404(a),

which would apply to tax year 1978 and which authorizes the Service

“to abate the unpaid portion of the assessment of any tax or any

liability in respect thereof, which (1) is excessive in amount, or

(2) is assessed after the expiration of the period of limitation

properly applicable thereto, or (3) is erroneously or illegally

assessed.”   26 U.S.C. § 6404 (a).     This argument fails.

     Both the statute and the applicable regulations indicate that

§ 6404(a) does not apply to income, estate, or gift taxes.         26

U.S.C. § 6404(b); Treas. Reg. § 301.6404-1(b).      Because the excess

interest at issue is a liability “in respect of” an income tax

assessment, and because income tax assessments are specifically

barred from consideration, the Tax Court correctly refused to

consider the Goettees’ claim under Section 6404(a). Bax v. Comm’r,

13 F.3d 54, 58 (2d Cir. 1993); Asciutto v. Comm’r, T.C. Memo 1992-

564, n.5.    We therefore affirm the Tax Court’s partial summary

judgment dismissing the abatement claim for tax year 1978.3




     3
      The Goettees also raise § 6402(a) in support of their claim
relating to the 1978 tax year. They, however, raise it for the
first time in their reply brief. Accordingly, the Goettees waived
this argument because they did not raise it in their opening brief.
United States v. Jones, 308 F.3d 425, 427 n.1 (4th Cir. 2002).

                                   8
                                 III.

     The Goettees next argue that the Tax Court erred in holding

that the Commissioner did not abuse his discretion in refusing to

abate interest for the vast majority of the delay alleged by the

Goettees.     Specifically,   they       contend   that   (1)   the   IRS   was

obligated to abate interest for the 328 day period between December

2, 1993 and October 26, 1994 that it delayed in computing the tax

due after it made the Barrister Books settlement offer to them; (2)

the period of time between October 4, 1995 and November 20, 1996

that the IRS chose for the partial abatement period was incorrect;

(3) the IRS was obligated to abate interest for the approximately

54 month period of time between May 1989 and November 1993 that it

took to extend the Barrister Books settlement offer to them; and

(4) the IRS was obligated to abate interest for the period of time

between May 15, 1996 and January 1997 that it held the $40,000

deposit.    We address all four contentions in turn.



                                     A.

     Before we discuss the Goettees’ specific contentions, however,

it is helpful to understand the statutory and regulatory context in

which interest abatement operates.         Interest on an unpaid federal

tax liability accrues from the date that the payment is due until

the date that the payment is made.             § 6601(a).       The Internal

Revenue Code, however, provides a mechanism to abate interest when


                                     9
the delay in making the tax payment results from unreasonable

actions by the IRS.   Abatement of interest for unreasonable errors

and delays by the IRS is controlled by § 6404(e), which, for the

time period applicable to this case, stated in relevant part:

     (e) Abatement of interest attributable to unreasonable
     errors and delays by Internal Revenue Service.

         (1) In general. In the case of any assessment of
     interest on . . . any deficiency attributable in whole
     or in part to any unreasonable error or delay by an
     officer or employee of the Internal Revenue Service
     (acting in his official capacity) in performing a
     ministerial or managerial act, . . . the Secretary may
     abate the assessment of all or any part of such interest
     for any period. For purposes of the preceding sentence,
     an error or delay shall be taken into account only if no
     significant aspect of such error or delay can be
     attributed to the taxpayer involved, and after the
     Internal Revenue Service has contacted the taxpayer in
     writing with respect to such deficiency or payment.

§ 6404(e)(1)(A) (1995).4

     Even though § 6404(e) is phrased in the permissive (“the

Secretary may abate the assessment of all or any part of such

interest”), the IRS does not have unfettered discretion in deciding

whether to abate interest.     Once the taxpayer meets procedural

requirements not relevant here, the Tax Court has the authority to

overturn the IRS’s decision not to abate interest if the taxpayer

can demonstrate both that the delay resulted from unreasonable


     4
      Congress later expanded 26 U.S.C. § 6404(e)(1) to allow the
IRS to abate interest for an "unreasonable” error or delay in
performing a "ministerial or managerial” act. Taxpayer Bill or
Rights, Pub. L. No. 104-168, § 301, 110 Stat. 1452, 1457 (1996)
(effective for tax years beginning after July 30, 1996). This
amendment to § 6404(e) is inapplicable to this case.

                                 10
delay by an IRS employee in performing a ministerial act and that

the Commissioner abused its discretion in refusing to abate the

interest.       26 U.S.C. § 6404(h).5       The Treasury regulations in

effect at the time relevant to this case defined a “ministerial

act” as

        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 (or other
        federal or state law) is not a ministerial act.

Temp. Treas. Reg. § 301.6404-2T, 52 Fed. Reg. 30163 (Aug. 13,

1987).      The regulations also provide examples of ministerial acts,

which include: (1) the transfer of a case file to another IRS

office      after   the   taxpayer   requested   and   the   appropriate   IRS

officials approved the transfer and (2) the issuance of a notice of

deficiency after the notice has been prepared and reviewed and all

other prerequisites to issuance have been completed. Id. (Examples

1-2).       Examples of acts that are not ministerial include: (1) the

delay in processing a taxpayer's return caused by the IRS's need

first to examine extensively a tax shelter in which the taxpayer

invested; (2) a manager's decisions to send an employee to training

and not to reassign the employee's cases during the training; and


        5
      At the time the Goettees filed their petition, the operative
jurisdictional statute was § 6404(g), which was predesignated §
6404(h) under the IRS Restructuring and Reform Act of 1998,
effective for tax years ending after July 22, 1998. Pub. L. No.
105-206 § 3305(a), 112 Stat. 685.

                                       11
(3) a decision to delay a planned examination of a taxpayer's

return because of other work priorities and resource limitations.

Id.   (Examples 3-5).

      Further, a taxpayer seeking interest abatement must go beyond

simply alleging general delay by the IRS, and also identify                 “a

specific period of time over which interest should be abated as a

result of the error or delay.”        Donovan v. Comm’r, 80 T.C.M. (CCH)

78, 80 (2000).

      To meet the burden of showing an abuse of discretion, the

taxpayer must demonstrate that the IRS refusal to abate interest

was made “arbitrarily, capriciously, or without sound basis in fact

or law.”     Lee v. Comm’r, 113 T.C. 145, 149 (1999).

      With   this   background   in   mind,   we   turn   to   the   Goettee’s

specific contentions.



                                      B.

      The Goettees first contend that the Tax Court erred in holding

that the IRS did not abuse its discretion in refusing to abate

interest for the period of time between the decision to extend the

Barristers Books settlement offer to taxpayers and the time when

the Goettees actually received the offer.6                Specifically, the


      6
      The IRS claims that the Goettees waived this argument by not
raising it in the Tax Court. After review of the record, we hold
that the Goettees’ arguments in the tax court concerning this issue
were substantial enough to preserve it for appeal. We consider the
argument fully here.

                                      12
Goettees contend that “[o]nce the decision was made by IRS to

extend the offer to all Barrister Books investors, the actual

transmittal of such an offer to each investor was a ministerial

act.”   Appellant’s Brief at 23.           A review of the record, however,

reveals that the Goettees vastly oversimplify the situation.

     Winkler did testify in the Tax Court that Barrister Books

settlement   offers      were   to   be   made   available    to   all    eligible

taxpayers.       J.A. at 95.     However, he immediately followed that

statement by noting that only he and one other appeals officer

would be available to work on the project.             Id.   Because he decided

that making the settlement offers to everyone at once would be

“very difficult” with only two agents working on the case, he

decided to make the offers in small groups so as not to overwhelm

resources.       Id.    In addition, Winkler testified that he stopped

sending out settlement offers while he waited for the “Series 115

case” to be resolved by the Tax Court.              Winkler anticipated that

the IRS would prevail, and that its settlement position would be

enhanced as a result.       Id. at 241-42.       In other words, the delay in

sending out settlement offers resulted both from an administrative

decision    to    not   overwhelm    limited     IRS   resources    and    from   a

strategic preference for offering the settlement from a position of

strength.

     Strategic litigation decisions are, almost by definition, not

ministerial.      See Lee, 113 T.C. at 150-51 (noting that an 11 year


                                          13
delay resulting from litigation decisions was not a ministerial

delay).     In addition, delay resulting from the allocation of IRS

resources is defined as non-ministerial according to the relevant

regulations.      Treas. Reg. § 301.6404- 2T(b)(2) (example 5) (1993).

Accordingly, we affirm the Tax Court holding that the IRS did not

abuse its discretion in holding that the 4 ½ year delay in sending

the Barrister Books settlement offer to the Goettees was the result

of   non-ministerial      actions     and,    therefore,     not    eligible     for

interest abatement pursuant to Section 6404(e).



                                        C.

      The Goettees next argue that the Tax Court erred in holding

that the IRS did not abuse its discretion in refusing to abate

interest    for    the   328   days   that    elapsed     between   the    Goettees

accepting    the    Barrister    Books       settlement    offer    and    the   IRS

informing them of the amount of tax that would be due.                    According

to the Goettees, the mechanical act of computing the tax due and

preparing a stipulation decision are ministerial acts which fall

under the statute.         While the Goettees correctly note that the

computation of the tax and mailing of the letter are ministerial

acts, J.A. at 574 (Tax Court finding), they fail to recognize that

these acts were not the reason for the delay.

      Specifically, the Tax Court found that “[i]t does not appear

that there was any delay in [the ministerial acts of] preparing the


                                        14
settlement documents and mailing them to petitioners.” Id. at 575.

Instead, the Tax Court found that the more than 300 day delay

resulted from Rowland’s “prioritization decisions.”              Id. at 572.

As we have noted, Rowland handled the Barrister Books settlement

offers in addition to her normal case load, which included cases

with statutory deadlines.       In view of this fact, the Tax Court

“conclude[d]   that    Rowland’s      delay     in   beginning    to    process

petitioners’   response    to   the        settlement   offer    is    properly

attributable to respondent’s reasonable prioritization decisions,

and thus is not attributable to error or delay in performing a

ministerial act.”     Id. at 574.

     Factual findings by the Tax Court can only be overturned upon

a showing of clear error–-which the Goettees do not make here.              See

Norfolk Southern Corp. v. Comm’r, 140 F.3d 240, 248 (4th Cir.

1998).   The Goettees instead challenge the Tax Court’s overall

legal conclusion.     They contend that allowing the IRS to delay in

the performance of ministerial acts via “prioritization decisions”

with non-ministerial acts will enable the agency to thwart the

goals of § 6404(e).    Unfortunately for the Goettees, the examples

given in the applicable regulations are almost directly on point:

     Example 4. A revenue agent is sent to a training course,
     and the agent's supervisor decides not to reassign the
     agent's cases. During the training course, no work is
     done on the cases assigned to the agent. Neither the
     decision to send the agent to the training course nor the
     decision not to reassign the agent's cases is, under the
     circumstances, a ministerial act. Thus, interest
     attributable to the delay cannot be abated.

                                      15
     Example 5. A taxpayer who claimed a loss from a tax
     shelter on the taxpayer's income tax return is notified
     that the Internal Revenue Service intends to examine the
     return. However, because of other work priorities and
     resource limitations, a decision is made not to commence
     the examination for an extended period thereafter. The
     decision not to commence the examination involves the
     exercise of judgment and discretion and is not a
     ministerial act; consequently, interest attributable to
     the period of delay cannot be abated.

Temp. Treas. Reg. § 301.6404-2T, 52 Fed. Reg. 30163 (Aug. 13, 1987)

(examples 4-5).    As in examples 4 and 5, the allocation of scarce

IRS resources that occurred here provides a valid reason for non-

ministerial IRS delay.     We find no meaningful distinction between

the prioritization decisions discussed in examples 4 and 5 and the

prioritization decisions in this case.         Accordingly, we affirm the

Tax Court on this claim.



                                       D.

     The Goettees next contend that the dates that the IRS chose to

abate interest in their case (10/04/95 to 09/20/96) were not linked

to any actual events and were, therefore, an arbitrary and abusive

use of IRS discretion.     The Goettees want these dates extended to

correlate to the date they first submitted their abatement request

(09/05/95)   and   the   date   that   the   IRS   acted   to   disallow   the

abatement claim (11/13/96).        We reject this claim because the

Goettees did not raise it until their motion for reconsideration

pursuant to Rule 161 of the Rules of the United States Tax Court.


                                       16
     “The Tax Court has held that decisions interpreting Rules 59

and 60 of the Federal Rules of Civil Procedure apply to motions for

reconsideration and further trial under Rule 161 of the Rules of

the United States Tax Court.” Estate of Kraus v. Comm’r, 875 F.2d

597, 602 (7th Cir. 1989) (citing Wheeler v. Comm’r, 46 T.C.M. (CCH)

642 (1983)). As in decisions under Rules 59 and 60 of the Federal

Rules of Civil Procedure, the panel reviews the Tax Court’s denial

of a motion for reconsideration under the abuse of discretion

standard.      Id.

     In this case, the Tax Court noted that

     Petitioners did not ask us to consider at trial or on
     brief the specific time periods set forth in their motion
     that were allegedly confused or ignored by the
     Commissioner's Appeals Office during which errors or
     delays occurred that warrant abatement of interest.
     Instead, petitioners asked the Court, on answering brief,
     to order an abatement for additional unspecified time
     periods. In Goettee I we declined to do so. We do not now
     entertain petitioners' more detailed request. As we
     stated, supra, reconsideration is not the appropriate
     forum for offering new legal theories or rehashing
     previously rejected arguments to reach the desired
     result.

Goettee v. Comm’r, 87 T.C.M. (CCH) 808, 810 (2004).               In other

words,   the    Tax   Court   rejected   this   argument   on   motion   for

reconsideration because the Goettees could and should have raised

this argument in a previous filing.       Such rejections are common in

Tax Court because “[r]econsideration under Rule 161 serves the

limited purpose of correcting substantial errors of fact or law and

allows the introduction of newly discovered evidence that the


                                    17
moving party could not have introduced, by the exercise of due

diligence, in the prior proceeding.”              Estate of Quick v. Comm’r,

110 T.C. 440, 441 (1998) (emphasis added). “Reconsideration is not

the appropriate forum for . . . tendering new legal theories.”                Id.

at 441-42.   Accordingly, we hold that the Tax Court did not abuse

its   discretion   in        refusing     to     consider   an     argument    on

reconsideration that should have been raised at trial.



                                         E.

      The Goettees argue that the Tax Court erred in holding that

IRS did not abuse its discretion in refusing to toll the accrual of

interest for the period of time that the IRS held the Goettees’

$40,000 submitted with the OIC.          While this argument may hold some

superficial appeal, the Tax Court clearly and concisely explained

why the applicable statutes and regulations do not allow for

interest   abatement    in    such   a   case.      We   find    this   reasoning

compelling and, accordingly, affirm the Tax Court on this issue.

      The Goettees contend, in essence, that the IRS cannot charge

them interest on a liability while the IRS is holding funds

designated to pay that liability. This contention fails because it

misapprehends the legal status of the money at issue.               Because the

Goettees submitted the check as part of an offer in compromise of

a liability, the $40,000 is treated as a deposit, not as a payment

of their tax liability.        See Keith v. Commissioner, 35 T.C. 1130,


                                         18
1136 (1961).     This was not money given to the IRS as a credit

against the liability at issue.         This was instead a deposit, in the

nature of a surety bond, that accompanied the Goettees’ offer to

settle the case.       See Roseman v. United States, 323 U.S. 658, 662

(1945).    There is no indication that the Goettees ever intended it

to be applied to their outstanding liability.7             It was part of a

separate transaction to settle the liability.              The effect of the

$40,000    on   the    Goettees’   accruing     interest    was,   therefore,

nonexistent.

      Also, even if the $40,000 should have been applied to the

liability, it still would not affect the Goettee’s claim for

abatement of interest.         The IRS procedures applicable at the

relevant time indicate that “[t]he Service will allocate any

remittance treated as a payment of tax to penalty or interest as

designated by the taxpayer if the remittance exceeds the full

amount of the underlying tax due. . . . If more than one period of

tax   is   involved,    the   Service    will   allocate    an   undesignated

remittance so as to satisfy all tax, penalty, and interest for the

earliest period before applying any excess to other periods.” Rev.



      7
      The regulations applicable at the time confirm that money
accompanying OICs is not normally meant to be applied to the
liability at issue. Specifically, they note that “[i]f an offer in
compromise is withdrawn or rejected, the amount tendered with the
offer . . . shall be refunded without interest, unless the taxpayer
has stated or agreed that the amount tendered may be applied to the
liability with respect to which the offer was submitted.” Treas.
Reg. § 301.7122-1(d)(4) (1993) (emphasis added).

                                        19
Proc. 84-58, 1985-48 I.R.B. 39, at 6.01 (emphasis added).         In this

case, therefore, the entire $40,000--which was not designated to

apply    to   any   specific   year--would   be   allocated   against   the

liability for 1978--which was over $40,000 and over which the Tax

Court does not have jurisdiction.         See, supra, Section II.8



                                     F.

     In short, we hold that the Tax Court did not err in holding

that the IRS did not abuse its discretion in refusing to abate

interest for all of the disputed periods at issue.



                                    IV.

        Finally, the Goettees appeal the Tax Court’s refusal to award

them reasonable litigation costs in this matter as a prevailing

party. Under § 7430, the prevailing party in any administrative or

court proceeding in connection with the “determination, collection,

or refund of any tax, interest, or penalty” may be awarded a

judgment for reasonable administrative or litigation costs.              §

7430(a).      In order to receive an award of litigation costs, the

taxpayer must (1) be the prevailing party; (2) have exhausted



     8
      There does appear to be a four month period in which the IRS
held the $40,000 after the Goettees withdrew the OIC. This extra
delay does not, however, address the underlying concern--that the
$40,000 cannot be applied to abate the interest for the underlying
debt. The proper remedy (if any) for that four month delay is not
the abatement that the Goettees request in this case.

                                     20
available    administrative             remedies;        (3)    meet   certain    net-worth

requirements; and (4) have not unreasonably protracted or delayed

the proceedings. §§ 7430(a), b(1), b(3), c(4).                               Because this

statute “renders the United States liable for attorney’s fees for

which it would not otherwise be liable, [it] amounts to a partial

waiver of sovereign immunity [and] must be strictly construed in

favor of the United States.”                 Ardestani v. INS, 502 U.S. 129, 137

(1991).     The panel reviews the Tax Court’s denial of litigation

costs    under     §   7430      for    an   abuse       of    discretion,    “accord[ing]

substantial deference to the reasoning of the Tax Court.”                           Dang v.

Comm’r, 259 F.3d 204, 208 (4th Cir. 2001).

        The Tax Court in this case held that the Goettees were not a

“prevailing party” at trial and, accordingly, did not reach the

other requirements under § 7430.                 Essentially, the statute defines

a “prevailing party” as one “which (I) has substantially prevailed

with     respect       to    the       amount    in      controversy,        or   (II)   has

substantially prevailed with respect to the most significant issue

or set of issues presented.”                 § 7430(c)(4)(A)(I) (emphasis added).

While     refusing          to     establish         a    mathematical        cutoff     for

“substantial,” the Tax Court noted that the Goettees only prevailed

with respect to three months of IRS delay, while the IRS prevailed

with respect to almost 16 months of the alleged delay.                              J.A. at

691.     In addition, the Court noted that the Goettees were only

awarded “not quite 5 percent” of the amount of interest that they


                                                21
claimed should be abated.             Id. at 695.          Taking these numbers into

account, as well as the fact that there was no one dominating issue

in this case on which the Goettees prevailed, the Tax Court held

that the Goettees did not “substantially prevail” as to either the

most significant issue or the amount in controversy in this case.

        The Goettees contest this decision, contending that they

prevailed with respect to the most significant issue--whether the

IRS abused its discretion in refusing to abate interest.                          Citing

Wilkerson v. United States, 67 F.3d 112 (5th Cir. 1995), and

Huckaby v. United States Dep’t. of Treasury, 804 F.2d 297 (5th Cir.

1986), the Goettees argue that “substantially prevailing” presents

a yes or no question--not a question that lends itself to degrees

of difference.          Once the IRS admitted that it had abused its

discretion,       according      to    the        Goettees,    they        “substantially

prevailed” as a matter of law.               We disagree.

        As the Tax Court held, the cases on which the Goettees rely

are distinguishable from this case. In both Wilkerson and Huckaby,

the Fifth Circuit did note that one does not need to prevail on the

majority     of   the    issues       presented       in    order     to    satisfy   the

“substantially prevail” test.                However, unlike those cases, in

which    a   central     issue    dominated         the     proceedings,       this   case

represented a series of claims of delay against the IRS, only a

very few of which actually bore fruit at trial.                             The Goettees

actually raised a series of individual--and unrelated--claims of


                                             22
delay against the IRS, requesting abatement for each individual

claim.    The parties, by stipulation, chose to conflate these

individual disputes into one abuse of discretion issue in the Tax

Court.   J.A. at 694.   This conflation, however, does not change the

fact that, at heart, this case presented a series of claims against

the IRS, the vast majority of which were determined in the IRS’s

favor in the Tax Court.       There was simply no central issue in this

case, as there was in Wilkerson and Huckaby, upon which either of

the parties could “substantially prevail,” notwithstanding the

remainder of the litigation.

      In short, this issue, as noted above,          falls squarely within

the   discretion   of   the   Tax   Court,   which   has   witnessed   these

proceedings from the beginning and has carefully weighed the

interplay between the parties’ stipulations, what was actually at

issue, and who actually prevailed.        J.A. at 694.     We hold that the

Tax Court did not abuse its discretion in refusing to award the

Goettees reasonable litigation costs.




                                     23
                               V.

     For all of the foregoing reasons, the Decision and Order of

the Tax Court is

                                                        AFFIRMED.9




     9
      The parties agree that there is a typographical error in the
Tax Court’s June 1, 2005 order.      Specifically, the Tax Court
decided that interest should be abated for the period January 25
though April 24, 1995. The June 1, 2005 order, however, states
that interest should be abated for the period February 24 through
April 24, 1995. The parties also agree that the dollar amounts
stated in the June 1, 2005 order correctly reflect the underlying
decision. The typographical error, therefore, is harmless. We
leave to the Tax Court’s discretion whether to correct this
harmless error.

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