                         T.C. Memo. 2007-204



                       UNITED STATES TAX COURT



                   RALPH HOWELL, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 13117-05.               Filed July 25, 2007.



     Nicholas E. Christin, for petitioner.

     Timothy Maher, for respondent.



                         MEMORANDUM OPINION


     VASQUEZ, Judge:    Petitioner submitted to the Internal

Revenue Service (IRS) a request for abatement of interest

relating to his 1984, 1985, and 1986 income tax liabilities.

Respondent denied the request.   The issue for our determination

is whether respondent abused his discretion under section 6404 by
                               - 2 -

failing to abate assessments of interest relating to petitioner’s

1984, 1985, and 1986 taxable years.1

                            Background

      The parties submitted this case fully stipulated pursuant to

Rule 122.   The stipulation of facts and the attached exhibits are

incorporated herein by this reference.   At the time he filed his

petition, petitioner resided in Florida.

I.   AMCOR Partnership Proceedings

      Petitioner invested in separate tax shelter partnerships

sponsored and operated by Amcor Capital, Inc. (AMCOR), in each of

the years 1984, 1985, and 1986.   Petitioner filed a Form 1040,

U.S. Individual Income Tax Return, for each of the 3 years,

reporting substantial losses attributable to his AMCOR

partnership investments in each year.2   Respondent accepted

petitioner’s 1984, 1985, and 1986 returns as filed.

      During the 1980s and 1990s, respondent pursued extensive

civil and criminal investigations into the operation of AMCOR and




      1
        All section references are to the Internal Revenue Code
in effect for the years in issue unless otherwise indicated, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
      2
        After receiving an extension of time to file, petitioner
timely filed his 1984 return. Petitioner filed his 1985 and 1986
returns a few days after the end of extension periods respondent
granted.
                                - 3 -

its related partnerships.3   In March of 1989, in connection with

respondent’s criminal investigation into AMCOR’s operations and

pursuant to a search warrant, respondent entered an AMCOR office

and seized materials relating to the operation of AMCOR’s tax

shelter partnerships.   Respondent did not return the materials he

seized from the search until 1993.

     The United States never brought criminal charges against

AMCOR or its related partnerships.      However, between 1990 and

1991, respondent issued separate notices of final partnership

administrative adjustment (FPAAs) to the tax matters partners

(TMPs) of several AMCOR partnerships including those partnerships

in which petitioner invested.   Respondent determined that the

AMCOR partnerships had claimed several deductions to which they

were not entitled, resulting in millions of dollars of tax

adjustments.

     The TMPs of several AMCOR partnerships, including the

partnerships in which petitioner invested, petitioned this Court

for review of the adjustments made in the FPAAs.       Those cases

were litigated together, and decisions in the cases were entered

on July 19, 2001.   Those decisions became final on or about

October 17, 2001.   The decisions that pertain to the AMCOR

partnerships in which petitioner invested include, inter alia,

     3
        For some of the history of AMCOR and the investigation
into its operations, see, for example, Crop Associates-1986 v.
Commissioner, T.C. Memo. 2000-216.
                               - 4 -

substantial reductions in claimed deductions.    The parties to

those cases stipulated that the partnerships entered into

transactions that lacked economic substance and created

substantial distortions of partnership income.

II.   Respondent’s Correspondence With Petitioner

      In a letter dated December 16, 1996, respondent notified

petitioner of a discrepancy between the amount of loss reported

on petitioner’s Schedule K-1, Partner’s Share of Income, Credits,

Deductions, etc., for Agri-Venture Fund, an AMCOR partnership in

which petitioner had invested during 1985, and the amount

petitioner reported on his return for 1985.   Petitioner responded

by a letter dated December 31, 1996, in which he advised

respondent that “[to] the best of my knowledge, the statute of

limitation has expired as to all personal, partnership or other

items reported on my 1985 tax return”.

      Respondent replied to petitioner in a letter dated January

20, 1997.   As noted supra, respondent had previously issued FPAAs

to the TMPs of all of the AMCOR partnerships in which petitioner

participated, and they had already petitioned this Court for

review of the adjustments made therein.   In relevant part, the

letter dated January 20, 1997, read as follows:

      Agri-Venture Fund is in Appeals at the present time.
      Since the examination is not completed, the statute
      remains open per Internal Revenue Code 6221. The tax
      treatment of any partnership item shall be determined
      at the partnership level. Therefore, the statute on
                                 - 5 -

     your return remains open for any adjustment resulting
     from the examination of Agri-Venture Fund.

     By three letters dated June 25, 2002, respondent issued

Forms 4549A, Income Tax Examination Changes, to petitioner

concerning his 1984, 1985, and 1986 tax years.     The Forms 4549A

showed increases in tax of $12,960.52 for 1984, $20,249.02 for

1985, and $15,109.01 for 1986.    The adjustments shown in the

Forms 4549A all resulted from differences between the amounts of

AMCOR partnership losses petitioner reported on his 1984, 1985,

and 1986 tax returns and the amounts of losses ultimately allowed

to those partnerships at the close of partnership-level

litigation in this Court.

     On or about July 15, 2002, petitioner mailed to respondent

three executed Forms 4549A and checks for the amounts of the

increases in tax shown on the Forms 4549A.     On July 22, 2002,

respondent posted petitioner’s payments towards his deficiencies

and assessed additional taxes in the amounts paid.     Respondent

simultaneously assessed interest for each year.

     On November 1, 2002, petitioner submitted three Forms 843,

Claim for Refund and Request for Abatement, pertaining to his

1984, 1985, and 1986 taxable years.      On his Forms 843, petitioner

requested interest abatement with regard to interest that accrued

on his 1984, 1985, and 1986 deficiencies during and after May

1988.
                                 - 6 -



      By separate letters dated January 17, 2003, respondent

denied petitioner’s requests for interest abatement.4   Respondent

concluded, inter alia, that petitioner did not meet the

requirements of section 6404(e) and that petitioner could not

challenge the extensions of the period of limitations on

assessment of AMCOR partnership items in his individual capacity.

      On May 4, 2005, respondent issued a letter entitled “Full

Disallowance--Final Determination” to petitioner denying

petitioner’s request for interest abatement.    In relevant part,

that letter stated:

      We regret that our final determination is to deny your
      request for an abatement of interest. We had to deny
      your request for the following reason(s):

           •   We did not find any errors or delays on our
               part that merit the abatement of interest in
               our review of available records and other
               information for the period requested.

      On July 15, 2005, petitioner petitioned the Court for review

of respondent’s determination.

                               OPINION

I.   Section 6404(e)

      Pursuant to section 6404(e)(1) as it applies in this case,

the Commissioner may abate the assessment of interest in two


      4
        The parties did not submit a copy of respondent’s Jan.
17, 2003, letter disallowing petitioner’s request for interest
abatement with regard to his 1986 deficiency, but the parties
stipulated that the contents of that letter were identical in all
respects to the letters disallowing petitioner’s requests for
interest abatement with regard to his 1984 and 1985 deficiencies.
                                 - 7 -

situations:   (1) When a deficiency is attributable to an error or

delay by an officer or employee of the IRS in performing a

ministerial act, or (2) when interest is assessed on any payment

of certain taxes (including income tax) to the extent that an

error or delay in such payment is attributable to an officer or

employee of the IRS being erroneous or dilatory in performing a

ministerial act.5   An error or delay by an officer or employee of

the IRS 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 IRS has contacted the taxpayer in writing

with respect to such deficiency or payment.    Id.

     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 review by

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

Proced. & Admin. Regs., 52 Fed. Reg. 30163 (Aug. 13, 1987).6    A

     5
        In 1996, sec. 6404(e) was amended by the Taxpayer Bill of
Rights 2, Pub. L. 104-168, sec. 301(a)(1) and (2), 110 Stat.
1457, to permit the Commissioner to abate the assessment of
interest attributable to IRS errors or delays in performing both
managerial and ministerial acts. The amendment applies to
interest accruing with respect to deficiencies for taxable years
beginning after July 30, 1996, and therefore does not apply to
the matter before us.
     6
        Final regulations under sec. 6404 were issued on Dec. 18,
1998, and contain the same definition of a ministerial act as do
the temporary regulations. See sec. 301.6404-2(b)(2), Proced. &
                                                   (continued...)
                                - 8 -

decision concerning the proper application of Federal tax law (or

other Federal or state law) is not a ministerial act.     Id.

      Even where errors or delays are present, the Commissioner’s

decision to abate interest remains discretionary.    See sec.

6404(e)(1); Mekulsia v. Commissioner, T.C. Memo. 2003-138, affd.

389 F.3d 601 (6th Cir. 2004).   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 to be used 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.

II.   Standard of Review and Burden of Proof

      When reviewing the Commissioner’s determination not to abate

interest, we apply an abuse of discretion standard.    See sec.

6404; Camerato v. Commissioner, T.C. Memo. 2002-28.     The taxpayer

bears the burden of proof with respect to establishing an abuse

of discretion.   See Rule 142(a).   In order to prevail, the

taxpayer must establish that in not abating interest the

Commissioner exercised his discretion arbitrarily, capriciously,


      6
      (...continued)
Admin. Regs. The final regulations generally apply to interest
accruing on deficiencies or payments of tax described in sec.
6212(a) for taxable years beginning after July 30, 1996, and do
not apply to the years at issue in this case. See sec. 301.6404-
2(d)(1), Proced. & Admin. Regs.
                                 - 9 -

or without sound basis in fact or law.    Lee v. Commissioner, 113

T.C. 145, 149 (1999); Woodral v. Commissioner, 112 T.C. 19, 23

(1999).

III.    Analysis

       Petitioner alleges that respondent engaged in several forms

of ministerial error or delay.

       Petitioner first alleges that during respondent’s criminal

investigation of AMCOR respondent “was in full possession of the

records necessary to issue a tax deficiency, but failed to do

so.”

       Regardless of whether respondent possessed the records

required to determine petitioner’s deficiencies during

respondent’s criminal investigation of AMCOR, the long and

winding procedural history of the AMCOR audit and litigation

prevented respondent from making that determination for several

years.    Pursuant to section 6221, the proper tax treatment of

petitioner’s AMCOR-related items was required to be determined at

the partnership level.    Pursuant to section 6225(a), respondent

was prohibited from assessing or collecting petitioner’s

deficiencies until the decisions in the AMCOR partnership cases

in this Court became final.    As noted supra, that did not occur

until October 17, 2001, long after respondent returned the AMCOR

records in 1993.    Petitioner has therefore failed to establish

that respondent’s delay in assessing petitioner’s deficiencies
                             - 10 -

until the close of AMCOR-related partnership litigation

constitutes error or delay in performing a ministerial act.7

     Petitioner also alleges that the imposition of interest is

grossly unfair because the amounts of interest assessed now

greatly exceed the amounts of the deficiencies.   As we have noted

on several occasions, the mere passage of time does not establish

error or delay in performing a ministerial act.   Lee v.

Commissioner, supra at 151; Mekulsia v. Commissioner, supra;

Hawksley v. Commissioner, T.C. Memo. 2000-354; Cosgriff v.

Commissioner, T.C. Memo. 2000-241.

     Petitioner further alleges that the information regarding

the examination status of Agri-Venture Fund contained in

respondent’s letter of January 20, 1997, was erroneous and its

inclusion constituted ministerial error.8

     7
        In Crop Associates-1986 v. Commissioner, supra, in answer
to the TMP’s allegations that respondent had delayed the
litigation of AMCOR partnership cases, we concluded that “Blame
(if any) for the time it took to proceed to the present posture
cannot be laid only at the feet of respondent.” Indeed, it
appears that the litigation was protracted by, among other
things, sundry claims advanced on behalf of the AMCOR
partnerships, none of which was deemed persuasive. See Crop
Associates-1986 v. Commissioner, 113 T.C. 198 (1999); Agri-Cal
Venture Associates v. Commissioner, T.C. Memo. 2000-271; Crop
Associates-1986 v. Commissioner, T.C. Memo. 2000-216.
     8
        In his second amended petition, petitioner alleges that
an additional letter from respondent dated June 27, 2000,
contained similar erroneous information. Petitioner attached a
copy of that letter to his second amended petition, but no copy
of the letter was entered into evidence. Documentary material
attached to a petition is not evidence. Greengard v.
                                                   (continued...)
                              - 11 -

      From the record before us, it appears that respondent’s

statement that “Agri-Venture Fund is in Appeals at the present

time” may have been incorrect.   As respondent notes, although

respondent had previously issued an FPAA to the TMP of Agri-

Venture Fund for the year at issue, it is possible that a

settlement offer in the case was being considered at the Appeals

Office level.   Nothing in the record indicates that this is not

so.   In any event, we conclude that petitioner has not

demonstrated that the accrual of any interest is attributable to

the above statement in respondent’s letter of January 20, 1997,

even if we assume that respondent’s statement was in error.

      In order to qualify for relief pursuant to section 6404(e),

a taxpayer must demonstrate a direct link between the error or

delay and a specific period during which interest accrued.

Guerrero v. Commissioner, T.C. Memo. 2006-201; Braun v.

Commissioner, T.C. Memo. 2005-221.     Respondent’s error has not

been shown to have caused the accrual of any interest.    Although

the case of Agri-Venture Fund may not have been “in Appeals” when


      8
      (...continued)
Commissioner, 29 F.2d 502 (7th Cir. 1928), affg. 8 B.T.A. 734
(1927); Pallottini v. Commissioner, T.C. Memo. 1986-530.
Moreover, in a fully stipulated case such as the matter before
us, we consider those matters not contained in the stipulations
to be without support in the record. Miyamoto v. Commissioner,
T.C. Memo. 1986-313. We therefore do not consider the contents
of the letter attached to petitioner’s second amended petition.
We note, however, that consideration of the letter would not
alter our conclusions in the matter before us.
                               - 12 -

respondent issued the letter of January 20, 1997, the case was

before this Court when the letter was issued.    As the letter

correctly noted, the period of limitations on assessment of

deficiencies in petitioner’s taxes was consequently suspended.

See sec. 6229(d)(1).    Petitioner has not shown that respondent’s

letter of January 20, 1997, caused any accrual of interest that

is attributable to error or delay in performing a ministerial

act.

       Petitioner further contends that the error contained in

respondent’s letter of January 20, 1997, provides an independent

basis for the abatement of interest pursuant to section 6404(f).

Generally speaking, section 6404(f) allows for the abatement of

penalties and additions to tax, and not of assessments of

interest.9   See sec. 301.6404-3(c)(2), Proced. & Admin. Regs.

Petitioner’s argument regarding section 6404(f) is therefore

unfounded.

       Finally, petitioner argues that respondent lost some of the

documents that respondent seized in March of 1989 from AMCOR’s

office and that respondent returned other documents in a state of

disarray.    Petitioner appears to argue that respondent is

collaterally estopped from denying such facts pursuant to


       9
        Sec. 6404(f) does allow for abatement of interest imposed
with respect to any penalty or addition to tax. See sec.
301.6404-3(c)(2), Proced. & Admin. Regs. Such interest is not at
issue in the matter before us.
                                - 13 -

statements in the U.S. Court of Appeals for the Fifth Circuit’s

opinion in the case of another AMCOR investor, Beall v. United

States, 467 F.3d 864 (5th Cir. 2006) affg. 335 F. Supp. 2d 743,

(E.D. Tex. 2004).10    The relevant portion of the Court of

Appeals’ opinion reads as follows:       “The IRS did not return the

partnerships’ books and records until 1993, and when the IRS did

return them, some had been lost and the remainder were in

disarray.”    Id. at 866.

     The doctrine of issue preclusion, or collateral estoppel,

provides that once an issue of fact or law is “‘actually and

necessarily determined by a court of competent jurisdiction, that

determination is conclusive in subsequent suits based on a

different cause of action involving a party to the prior

litigation.’”     Monahan v. Commissioner, 109 T.C. 235, 240 (1997)

(quoting Montana v. United States, 440 U.S. 147, 153 (1979)).

The following five conditions must be satisfied before

application of issue preclusion in the context of a factual

dispute:     (1) The issue in the second suit must be identical in

all respects with the one decided in the first suit; (2) there

must be a final judgment rendered by a court of competent

jurisdiction; (3) collateral estoppel may be invoked against

     10
        Petitioner does not appear to request that the Court
take judicial notice of the “facts” in Beall v. United States,
467 F.3d 864 (5th Cir. 2006). We note, however, that taking
judicial notice would be inappropriate in this matter. See
Abelein v. Commissioner, T.C. Memo. 2007-24.
                                - 14 -

parties and their privies to the prior judgment; (4) the parties

must actually have litigated the issues and the resolution of

these issues must have been essential to the prior decision; and

(5) the controlling facts and applicable legal rules must remain

unchanged from those in the prior litigation.    Peck v.

Commissioner, 90 T.C. 162, 166-167 (1988), affd. 904 F.2d 525

(9th Cir. 1990).

     The statement in the Court of Appeals’ opinion in Beall does

not establish that respondent failed to return documents or that

respondent returned other documents in disarray.   First,

petitioner was not a party to the dispute in Beall.    Second, as

respondent correctly notes, the Court of Appeals’ opinion in

Beall related to the review of a District Court’s decision to

grant a motion of respondent’s that was treated as a motion to

dismiss for failure to state a claim upon which relief could be

granted pursuant to rule 12(b)(6) of the Federal Rules of Civil

Procedure.   Pursuant to that rule:

     “a claim may be dismissed when a plaintiff fails to
     allege any set of facts in support of his claim which
     would entitle him to relief,” and “the court accepts as
     true the well-pled factual allegations in the
     complaint, and construes them in the light most
     favorable to the plaintiff.”

Beall v. United States, 335 F. Supp. 2d at 747 (quoting Taylor v.

Books A Million, Inc., 296 F.3d 376, 378 (5th Cir. 2002))

(internal citations removed).    Applying this standard, both the

District Court and the Court of Appeals were required to accept
                              - 15 -

the plaintiffs’ factual allegations as true regardless of their

veracity.   Consequently, the question of whether respondent’s

agents or employees lost some documents and returned others in

disarray was not actually litigated in Beall, and collateral

estoppel does not apply to the factual assumptions in Beall.     The

parties have not stipulated the relevant factual assumptions in

Beall.   Petitioner has therefore not established that respondent

lost some AMCOR records and returned others in disarray in

pursuit of respondent’s criminal investigation of AMCOR.

     We conclude that respondent’s denial of petitioner’s request

for interest abatement was not arbitrary, capricious, or without

sound basis in fact or law.   In reaching all of our holdings

herein, we have considered all arguments made by the parties, and

to the extent not mentioned above, we find them to be irrelevant

or without merit.

     To reflect the foregoing,


                                         Decision will be entered

                                    for respondent.
