                  T.C. Summary Opinion 2005-104



                     UNITED STATES TAX COURT



          PETER AND MARGARET GIRAGOSIAN, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 16501-03S.           Filed July 26, 2005.


     Peter and Margaret Giragosian, pro se.

     Thomas D. Greenaway, for respondent.




     COUVILLION, Special Trial Judge:   This case was heard

pursuant to section 7463 in effect when the petition was filed.1

The decision to be entered is not reviewable by any other court,

and this opinion should not be cited as authority. Petitioners



     1
      Unless otherwise indicated, subsequent section references
are to the Internal Revenue Code in effect for the years at
issue.
                               - 2 -

seek a review under section 6330(d) of respondent’s decision to

proceed with collection of petitioners’ Federal income tax

liabilities for the 1998 and 1999 tax years.2

      Some of the facts were stipulated.   Those facts, with the

exhibits annexed thereto, are so found and made part hereof.

Petitioners’ legal residence at the time the petition was filed

was Mariposa, California.

      Petitioners claimed a low-income housing credit on each of

their 1998 and 1999 Federal income tax returns.    This credit is

one element of the general business credit described in section

38(b), and the amount of the credit is calculated under section

42.   The general business credit cannot exceed the excess of a

taxpayer’s net income tax over the tentative minimum tax, even if

the taxpayer is not liable for the alternative minimum tax.     Sec.

38(c)(1).   Petitioner husband (Mr. Giragosian) incorrectly

calculated the credit and claimed a greater amount than that

which was allowable.   Sometime during 1999 and 2000, the IRS

corrected the computational error and assessed the additional




      2
      Respondent maintains that the taxable year 1999 is not
before the Court because the petition did not set out a claim of
error regarding that year. The Court disagrees. Petitioners
properly petitioned the Court for review of 1998 as well as 1999.
Consequently, both 1998 and 1999 are properly before the Court.
                                   - 3 -

amount of the excess credit that had been claimed3 as well as the

tax shown as due and owing on the return      Sec. 6213(b).

       On July 30, 2002, respondent notified petitioners of an

intent to levy with respect to petitioners’ unpaid tax

liabilities for 1998 and 1999.      The notice listed $2,729.10 due

for 1998 and $3,014.71 due for 1999.

       Petitioners filed a timely Form 12153, Request for a

Collection Due Process Hearing.      In their request, petitioners

requested an explanation of their underlying tax deficiencies for

the years in question and complained of numerous delays by the

IRS.       An Appeals officer subsequently provided petitioners with a

written explanation of both their error and the IRS adjustments.

Petitioners did not offer any documentation in dispute of this

explanation, nor did they propose any collection alternatives;

therefore, on August 15, 2003, respondent issued a Notice of

Determination to petitioners, concluding:


       you have not established the underlying tax liability to be
       incorrect. You did not correctly figure the limitation on
       low-income housing credits on your original tax returns, and
       they were corrected during processing. You did not provide
       financial information, as requested, to enable consideration
       of collection alternatives * * * The tax will not be abated
       and the lien will not be released or withdrawn.



       3
      The record does not reflect the exact dates on which the
errors on petitioners’ 1998 and 1999 Federal income tax returns
were corrected; however, petitioners stipulated the underlying
tax deficiencies for both years. The exact dates, therefore, are
inconsequential.
                                - 4 -

Petitioners filed a timely petition in this Court appealing the

Appeals officer’s determination.4

     The Court must decide whether petitioners are entitled to

relief from the Appeals officer’s determination.   Where the

underlying tax liability is properly at issue, the Court reviews

that issue de novo.    Goza v. Commissioner, 114 T.C. 176, 181-182

(2000).   Although petitioners did not receive a notice of

deficiency and were entitled to challenge the underlying tax

liability, they stipulated the correctness of the Commissioner’s

assessment.   Therefore, where the underlying tax liability is not

at issue, as in this case, this Court reviews the determination

under an abuse of discretion standard.    Sego v. Commissioner, 114

T.C. 603 (2000).   An abuse of discretion is defined as any action

that is unreasonable, arbitrary, or capricious, clearly unlawful,

or lacking sound basis in law, taking into account all the facts

and circumstances.    See, e.g., Thor Power Tool Co. v.

Commissioner, 439 U.S. 522, 532-533 (1979); Swanson v.

Commissioner, 121 T.C. 111, 119 (2003).

     Petitioners seek an abatement of all penalties and interest

under section 6404 with respect to their taxable years 1998 and

1999 and claim that respondent’s failure to do so amounts to an



     4
      Petitioners petitioned the Court challenging the underlying
tax deficiencies; however, they have since stipulated to the
underlying deficiencies and seek only an abatement of interest
and penalties.
                               - 5 -

abuse of discretion.   With respect to petitioners’ position

regarding respondent’s failure to abate interest under section

6404, Mr. Giragosian testified that, although he stated his

reluctance to pay interest and penalties to one IRS agent, he

neglected to address and request an abatement of interest during

the Appeals conference.   Petitioners formally raised the

abatement of interest issue for the first time at trial.5

     As previously stated, respondent’s notice of determination

is generally reviewed under an abuse of discretion standard.

Lunsford v. Commissioner, 117 T.C. 183, 185 (2001).   Under that

standard of review, it would be anomalous and improper for this

Court to conclude that respondent’s Appeals Office abused its

discretion under section 6330(c)(3) in failing to grant relief on

a claim that was not raised by petitioners in the Appeals

process.   Estate of Chimblo v. Commissioner, T.C. Memo. 1997-535,

affd. 166 F.3d 119 (2d Cir. 1999); see also secs. 301.6320-

1(f)(2), Q&A-F5, 301.6330-1(f)(2), Q&A-F5, Proced. & Admin. Regs.

Accordingly, in this Court’s review for an abuse of discretion

under section 6330(d)(1) of respondent’s determination, generally

the Court considers only arguments, issues, and other matters



     5
      The petition does not specifically address abatement of
interest and penalties. As previously noted, petitioners’
original petition challenged the underlying deficiencies and
asked for a clear explanation of the assessment; however, as
noted above, petitioners later stipulated the correctness of the
deficiencies.
                               - 6 -

that were raised at the collection due process hearing or

otherwise brought to the attention of the Appeals officer.

Magana v. Commissioner, 118 T.C. 488 (2002).

     Petitioners, at trial, did not explain why they neglected to

raise the issue of abatement of interest with the Appeals

officer.   Moreover, at trial, Mr. Giragosian acknowledged receipt

of Form 843, Claim for Refund and Request for Abatement,

accompanied by a letter explaining: “if you feel the interest was

due to unreasonable error or delay you may request an abatement

of interest on the Form 843, which is enclosed.”   Petitioners’

only explanation as to why they did not reply to this letter or

file the Form 843 was that they thought it was futile.

Petitioners, therefore, have not established any credible basis

for an exception to the general rule in order to consider the new

issue of abatement of interest.

     With respect to petitioners’ argument regarding respondent’s

failure to abate penalties under section 6404,6 assuming there

were penalties, petitioners acknowledged at trial that they did

not raise this issue at their Appeals Office hearing.


     6
      The record does not establish conclusively whether
penalties actually were assessed against petitioners.
Petitioners possessed a letter from an IRS agent stating that
penalties were assessed; however, the letter did not specify what
the penalties were. Likewise, counsel for respondent stated
that, while he was fairly sure no penalties had been assessed
against petitioners, he did find one reference to a sec. 6651(a)
failure to pay penalty in the administrative record, which he
conceded was “not the cleanest”.
                                - 7 -

Consequently, for the reasons discussed above, the Court will not

consider the matter.

     Petitioners received an appropriate hearing under section

6330(b)(1).   Day v. Commissioner, T.C. Memo. 2004-30; Leineweber

v. Commissioner, T.C. Memo. 2004-17; sec. 301.6330-1(d)(2), Q&A-

D6, Proced. & Admin. Regs.   Respondent properly verified that the

requirements of applicable law and administrative procedures were

met and balanced the need for efficient collection of taxes with

the legitimate concern of petitioners that the collection action

be no more intrusive than necessary.      On this record, the Court

holds that there was no abuse of discretion in sustaining the

notice of intent to levy.    Respondent, therefore, is sustained.

     Reviewed and adopted as the report of the Small Tax Case

Division.



                                             An appropriate order and

                                        decision will be entered.
