                         T.C. Memo. 2009-151



                       UNITED STATES TAX COURT



    JACK M. CHAKOIAN, II AND KIM M. CHAKOIAN, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 19982-07.                  Filed June 25, 2009.



     Jack M. Chakoian, II, pro se.

     Robert V. Boeshaar, for respondent.



               MEMORANDUM FINDINGS OF FACT AND OPINION


     HAINES, Judge:    On June 7, 2007, respondent issued a notice

of final determination denying petitioners’ claim for abatement

of interest.   Petitioners timely filed a petition under section

6404(h).1   The issue for decision after concessions is whether

     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended. Amounts are rounded to
                                                   (continued...)
                                 - 2 -

petitioners are entitled to an abatement of interest under

section 6404(e) with respect to their 1998 and 1999 Federal

income tax liabilities.2

                           FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the supplemental stipulation of

facts, together with the attached exhibits, are incorporated

herein by this reference.    At the time petitioners filed their

petition, they resided in the State of Washington.

I.   Notices of Deficiency

     Petitioners timely filed Forms 1040, U.S. Individual Income

Tax Return, for 1998 and 1999.

     On May 18, 2000, respondent sent a letter to petitioners

notifying them that their 1998 return had been selected for

examination.   On March 2, 2001, respondent issued a notice of

deficiency with respect to petitioners’ 1998 return.    Petitioners

did not petition this Court in response to the notice of

deficiency.




     1
      (...continued)
the nearest dollar.
     2
      Petitioners concede that they are not entitled to abatement
of interest for periods beginning before Mar. 4, 2002.
Petitioners also concede that they are not entitled to abatement
of interest with respect to their 2003 Federal income tax
liability.
                               - 3 -

      On March 22, 2001, respondent sent a letter to petitioners

notifying them that their 1999 return had been selected for

examination.   On December 12, 2001, respondent issued a notice of

deficiency with respect to petitioners’ 1999 return.

      Rather than petition this Court in response to the notice of

deficiency, petitioner Jack M. Chakoian, II (Mr. Chakoian) called

respondent on March 4, 2002, and requested that the case be

transferred from Chicago, Illinois, to Seattle, Washington.

Respondent informed Mr. Chakoian that the case could not be

transferred during the 90-day statutory period when petitioners

could file a petition with the Tax Court.

II.   Offer-in-Compromise

      On April 2, 2002, petitioners submitted an offer-in-

compromise (OIC) based on doubt as to liability.   Respondent’s

witness, IRS Interest Abatement Coordinator Tom Poppe (Mr.

Poppe), testified at trial that the IRS office in charge of

processing OICs based on doubt as to liability was “inundated

with offers at the time.”   He also testified that OICs based on

doubt as to liability were considered low-priority cases, so it

was “unfortunately typical for offers in compromise not to be

worked for two or three years”.   Because of the backlog of OICs

already filed with the Internal Revenue Service (IRS),

petitioners’ OIC was not assigned to a tax examiner until March

4, 2004.   On March 9, 2004, respondent notified petitioners that
                                 - 4 -

their OIC would be rejected.     On June 4, 2004, respondent sent an

official rejection memorandum to petitioners.

       On July 7, 2004, petitioners requested a conference

with the IRS Appeals Office.     On September 21, 2004, and February

16, 2005, Appeals Officer Jeffrey Sherrill held appeals

conferences with petitioners.     On July 25, 2005, the Appeals

Office mailed petitioners a letter rejecting their OIC but

allowing them to reduce their 1999 liability by $2,889 and their

1999 section 6662 penalty by $578.

III. Interest Abatement

       On November 21, 2006, petitioners submitted requests for

abatement of interest to the IRS and sent copies of the requests

to the Taxpayer Advocate in Seattle, Washington.     Respondent

assigned the interest abatement case to Mr. Poppe.     On December

22, 2006, Mr. Poppe completed a 12-page analysis of petitioners’

requests entitled “Interest and Penalty Abatement Case Details.”

The analysis concluded that respondent should deny petitioners’

interest abatement request because respondent had followed all

established administrative procedures for processing petitioners’

OIC.

       On February 2, 2007, Mr. Chakoian sent a letter to Mr. Poppe

indicating that Mr. Chakoian had previously received a letter

from Mr. Poppe which articulated respondent’s intent to deny

petitioners’ request.     Mr. Chakoian argued in his letter that
                                - 5 -

petitioners were entitled to interest abatement because a call

center employee of respondent had instructed petitioners to

submit an OIC in order to move the case from Chicago to Seattle.

     On March 7, 2007, petitioners’ interest abatement case was

assigned to Appeals.    On March 9, 2007, Appeals declined

petitioners’ request for interest abatement but allowed a partial

section 6662 penalty abatement of $1,290 for 1998 and $796 for

1999.

     On June 7, 2007, the Office of Appeals in Sacramento,

California, sent petitioners a notice entitled “Full Disallowance

- Final Determination” (final determination) in response to

petitioners’ request for abatement of interest.    The final

determination did not explain the reasons for respondent’s denial

of petitioners’ request.    The pertinent part of the final

determination 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):

           If you disagree with our denial of your claim for
     an abatement of interest, and you meet the eligibility
     requirements described below, you may request a review
     of our denial in the United States Tax Court.

     On September 4, 2007, petitioners filed a petition for

review of respondent’s failure to abate interest under section

6404, and a trial was held on June 9, 2008, in Seattle,

Washington.
                                - 6 -

                               OPINION

       We review the Commissioner’s determination not to abate

interest for abuse of discretion.     Sec. 6404(h)(1).   Our inquiry

is a factual one, and we proceed on a case-by-case basis.     See

Boyd v. Commissioner, T.C. Memo. 2000-16.     The Court will direct

the Commissioner to abate interest if the Commissioner’s exercise

of discretion was arbitrary, capricious, or without sound basis

in fact or law.    See Mathia v. Commissioner, T.C. Memo. 2009-120;

Kincaid v. Commissioner, T.C. Memo. 1999-419.

       The Court has jurisdiction to review the record in the

instant case to determine whether to sustain respondent’s denial

of relief.    See sec. 6404(h)(1).   Petitioners claim that

respondent abused his discretion in failing to abate interest

under section 6404(e) because (1) petitioners were induced to

file an OIC upon the oral advice of one of respondent’s call

center employees and (2) respondent’s decision to give

petitioners’ OIC low-priority status resulted in unreasonable

delay.

       Section 6404(e)(1) provides that the Secretary may abate the

assessment of interest on any deficiency in tax attributable in

whole or in part to any unreasonable error or delay by an officer

or employee of the IRS in performing a ministerial or managerial

act.    A ministerial act means a procedural or mechanical act that

does not involve the exercise of judgment or discretion and
                                 - 7 -

occurs during the processing of a taxpayer’s case after all the

prerequisites to the act, such as conferences and review by

supervisors, have taken place.    See Lee v. Commissioner, 113 T.C.

145, 149-150 (1999); sec. 301.6404-2(b)(2), Proced. & Admin.

Regs.   A managerial act means an administrative act that involves

a temporary or permanent loss of records or the exercise of

judgment or discretion relating to personnel management during

the processing of a taxpayer’s case.     Sec. 301.6404-2(b)(1),

Proced. & Admin. Regs.   In contrast, a decision concerning the

proper application of Federal tax law is not a ministerial or

managerial act.   Sec. 301.6404-2(b), Proced. & Admin. Regs.

     Petitioners first contend that they were induced to file an

OIC upon the oral advice of one of respondent’s call center

employees.   Petitioners were unable to specify the name of this

employee or the date of their conversation.     In any case,

furnishing such oral advice does not constitute an erroneous

performance of a managerial or ministerial act under section

301.6404-2, Proced. & Admin. Regs.

     Petitioners also claim that respondent committed a

managerial act that resulted in an unreasonable delay by failing

to process petitioners’ OIC from April 2, 2002, through March 4,

2004.   From our review of the record, respondent was not dilatory

in performing a managerial act.    Although the decision to give

petitioners’ OIC low-priority status constituted a managerial
                               - 8 -

act, respondent’s decision did not lead to an unreasonable error

or delay under the facts of this case.    Petitioners do not

allege, and the record does not show, that respondent deviated

from standard IRS procedures in processing petitioners’ OIC.       See

Braun v. Commissioner, T.C. Memo. 2005-221.    The time respondent

took to process petitioners’ OIC resulted from a backlog of OICs

based on doubt as to liability, and the delay was not

unreasonable under the circumstances.3    Accordingly, petitioners

have not shown that respondent committed a managerial act that

lead to an unreasonable error or delay.

     Petitioners’ arguments do not rise to the level the statute

requires for relief.   See Cosgriff v. Commissioner, T.C. Memo.

2000-241 (holding that the taxpayers’ allegations of hardships

were not proper grounds for interest abatement).4    Petitioners

received $4,975 of relief from respondent by participating in the



     3
      Congress has taken steps to safeguard against unreasonable
delays in the processing of OICs by enacting the Tax Increase
Prevention and Reconciliation Act of 2005, Pub. L. 109-222, 120
Stat. 345 (2006), on May 17, 2006. Under the act, the IRS must
make a determination on an OIC within 2 years or else the offer
is deemed accepted. Id. sec. 509(b)(2), 112 Stat. 363. This
provision became effective for all offers received by the IRS
starting July 16, 2006, id. sec. 509(d), 112 Stat 364, and thus
is not applicable to the present case, see 1 Administration,
Internal Revenue Manual (CCH), pt. 5.8.1.9, at 16,257 (Sept. 23,
2008).
     4
      Petitioners also sought at trial to raise substantiation
issues with regard to business expenses. As this is an interest
abatement case, we cannot adjudicate substantiation issues. See
Krugman v. Commissioner, 112 T.C. 230, 236-237 (1999).
                                 - 9 -

Appeals process.5   Given that the record contains no evidence

that respondent committed any ministerial or managerial acts

requiring abatement of interest under section 6404, we are unable

to offer them further relief.    Accordingly, despite the paucity

of reasoning in respondent’s final determination, the trial

record establishes that respondent did not abuse his discretion

in determining that petitioners are not entitled to abatement of

interest under section 6404.     See Jacobs v. Commissioner, T.C.

Memo. 2000-123.

     In reaching our holding herein, we have considered all

arguments made, and, to the extent not mentioned above, we

conclude that they are moot, irrelevant, or without merit.

     To reflect the foregoing,


                                           Decision will be entered

                                      for respondent.




     5
      Respondent reduced petitioners’ 1999 liability by $2,889
and their 1999 sec. 6662 penalty by $578 when petitioners
appealed the rejection of their OIC. Respondent further reduced
petitioners’ 1999 sec. 6662 penalty by $218 to $796 and reduced
the 1998 penalty by $1,290 when petitioners filed an interest
abatement claim.
