1 Unless otherwise indicated, all section references are

to the Internal Revenue Code in effect for the taxable year in

issue. All Rule references are to the Tax Court Rules of

Practice and Procedure.

T.C. Memo. 1998-352

UNITED STATES TAX COURT

THEODORE EDWARD HAGADONE, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 6022-97. Filed October 5, 1998.

Theodore Edward Hagadone, pro se.

Anne W. Durning, for respondent. 

MEMORANDUM OPINION

DINAN, Special Trial Judge: This case was heard pursuant to

the provisions of section 7443A(b)(3) and Rules 180, 181, and

182.1
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In a statutory notice of deficiency dated February 27, 1997,

respondent determined a deficiency in petitioner's Federal income

tax for 1994 in the amount of $3,934.

The issues for decision are: (1) Whether respondent is

bound by the contents of a report issued by his Problem

Resolution Officer subsequent to the issuance of the statutory

notice of deficiency; and (2) whether this Court has jurisdiction

to consider petitioner's claim for an abatement of interest.

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

The stipulations of fact and attached exhibits are incorporated

herein by this reference. Petitioner resided in Hereford,

Arizona, on the date the petition was filed in this case.

Petitioner timely filed his Federal income tax return for

1994 on which he correctly reported his filing status as single. 

In the statutory notice of deficiency in this case

respondent determined that petitioner received but failed to

report on his 1994 return the following amounts of income:

Pensions and annuities $2,359

IRA distributions 3,216

Taxable Social Security benefits 7,188

Gambling income 26

With respect to the unreported pension and annuity income

which petitioner received from the Office of Personnel Management

Retirement Programs (the OPM Retirement Program), respondent

concedes that petitioner is entitled to exclude from his gross

income any portion of the amount received which is attributable
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2 Petitioner received annuity payments from the OPM

Retirement Program in the total amount of $2,359 during 1994. 

Petitioner's original contributions to the OPM Retirement Program

amounted to $2,511. At trial, respondent's counsel stated to the

Court that respondent would be able to calculate the excludable

portion of the annuity payments from petitioner's responses to

her line of questioning with respect to this matter. We

therefore direct respondent to take into account the excludable

amount of the annuity payments in the Rule 155 computation.

to his original investment.2 As a result of the increase in

petitioner's adjusted gross income, respondent also made a

computational adjustment to petitioner's allowable casualty loss

deduction. In the statutory notice of deficiency, respondent

determined petitioner's Federal income tax liability for 1994 to

be $10,238.

After the statutory notice of deficiency was issued on

February 25, 1997, petitioner communicated with respondent's

Ogden Service Center by letter of February 27, 1997, and by

telephone on April 1, 1997, to discuss the adjustments determined

in the statutory notice.

In a letter to petitioner dated April 9, 1997 (the letter),

from a member of respondent's Problem Resolution Staff, which

enclosed a report that purportedly supplemented the February 25,

1997, notice of deficiency, the letter explained to petitioner

the reasons for the adjustments made in the statutory notice. It

further informed petitioner that it was determined that he was

entitled to an additional gambling loss in the amount of $126. 

In recalculating petitioner's 1994 Federal income tax liability,
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3 This amount does not take into account respondent's

forthcoming adjustment to the taxable amount of the annuity

payments received by petitioner during 1994. See supra note 2.

the letter erroneously determined the amount of the tax to be

$9,202, by applying the tax rate schedule for "head of

household", as opposed to petitioner's tax liability as

determined in the statutory notice which used the "single" tax

rate schedule.

Petitioner stipulated that he received the unreported

amounts of income determined by respondent. Respondent concedes

that petitioner is entitled to the additional Schedule A gambling

loss deduction in the amount of $126 allowed in the April 9,

1997, letter. Respondent maintains, however, that petitioner's

proper filing status is single and that as a result of the

increased gambling loss deduction the amount of the "revised

deficiency" is $3,906, based on a Federal income tax liability

for 1994 in the amount of $10,210.3

The first issue for decision is whether respondent is bound

by the report issued on April 9, 1997. Petitioner argues that

the Court should hold that he is liable only for the tax

liability determined in the report. He contends that the report

constitutes a contract between himself and respondent. We

disagree. It is well established that as a general rule the

Commissioner is finally and conclusively bound by an agreement

with a taxpayer only if the parties enter into a closing
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4 Sec. 7121(b) provides an exception to this rule upon a

showing of fraud, or malfeasance or misrepresentation of a

material fact.

agreement under the provisions of section 7121.4 Holland v.

Commissioner, 70 T.C. 1046, 1048-1049 (1978), affd. 622 F.2d 95

(4th Cir. 1980); Hudock v. Commissioner, 65 T.C. 351, 362 (1975). 

The statutory procedure is ordinarily the exclusive method by

which the Commissioner may be finally and conclusively bound. 

Botany Worsted Mills v. United States, 278 U.S. 282, 288 (1929);

Estate of Meyer v. Commissioner, 58 T.C. 69, 70-71 (1972). "The

very fact that Congress has provided a way in which the Internal

Revenue Department may bind itself, precludes the possibility of

its being bound by some other procedure." Knapp-Monarch Co. v.

Commissioner, 139 F.2d 863, 864 (8th Cir. 1944), affg. 1 T.C. 59

(1942).

It is also well established that the Commissioner is not

bound by the unauthorized and erroneous actions of his employees

where the law dictates a different result. See Keystone Auto.

Club Cas. Co. v. Commissioner, 40 B.T.A. 291 (1939), as

supplemented 42 B.T.A. 356 (1940), affd. 122 F.2d 886 (3d Cir.

1941); see also Bagnell v. Commissioner, T.C. Memo. 1993-378 (and

cases cited therein). We have reviewed the April 9, 1997, report

and find that it erroneously used "head of household" filing

status to compute petitioner's tax liability.
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Accordingly, we hold that respondent is not bound by the

determinations made in the report, except to the extent that

respondent's counsel conceded in her trial memorandum the

additional allowance for gambling losses in the amount of $126.

The second issue for decision is whether this Court has

jurisdiction to consider petitioner's claim seeking abatement of

interest.

Section 6404(g), as enacted by the Taxpayer Bill of Rights 2

(TBOR 2), Pub. L. 104-168, sec. 302(a), 110 Stat. 1452, 1457

(1996), authorizes us to review denials by the Commissioner of

requests for abatement of interest under section 6404. White v.

Commissioner, 109 T.C. 96 (1997); Banat v. Commissioner, 109 T.C.

92 (1997); Goettee v. Commissioner, T.C. Memo. 1997-454. Section

6404(g) provides, in pertinent part, as follows:

(g) Review of Denial of Request for Abatement of

Interest.--

(1) In General.--The Tax Court shall have

jurisdiction over any action brought by a taxpayer

who meets the requirements referred to in section

7430(c)(4)(A)(ii) to determine whether the

Secretary's failure to abate interest under this

section was an abuse of discretion, and may order

an abatement, if such action is brought within 180

days after the date of the mailing of the

Secretary's final determination not to abate such

interest.

TBOR 2 section 302(b), 110 Stat. 1458, provides that section

6404(g) applies “to requests for abatement after the date of the

enactment of this Act." TBOR 2 was enacted on July 30, 1996.
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5 Petitioner is still free to formally request an

abatement of interest from respondent pursuant to sec. 6404(e). 

If his request is denied, he may then file a "Petition for Review

of Failure to Abate Interest under Code Section 6404" with this

Court. Rule 281.

In this case, the record does not show that a formal request

for abatement of interest was made to respondent or that a notice

of final determination not to abate interest pursuant to section

6404(e) was mailed to petitioner. In a case seeking the review

of the failure to abate interest, jurisdiction in this Court

depends, in part, upon the issuance of a valid notice of final

determination not to abate interest. Sec. 6404(g)(1); Rule

280(b)(1). Because no notice of final determination denying a

request for abatement of interest has been issued to petitioner,

we hold that we lack jurisdiction to consider petitioner's claim

seeking abatement of interest.5 Banat v. Commissioner, supra at

95.

To reflect the foregoing,

Decision will be entered

under Rule 155.