T.C. Memo. 2006-201

UNITED STATES TAX COURT

ORLANDO J. AND CHRISTINA E. GUERRERO, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 7046-05. Filed September 20, 2006.

Orlando J. and Christina E. Guerrero, pro sese.

Frederick J. Lockhart, Jr., for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

MARVEL, Judge: On October 19, 2004, respondent issued a

notice of final determination disallowing petitioners’ claim for

abatement of interest accrued and assessed with respect to

petitioners’ unpaid Federal income tax liability for 2000. 
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1Unless otherwise indicated, all section references are to

the Internal Revenue Code as amended, and all Rule references are

to the Tax Court Rules of Practice and Procedure.

Petitioners timely filed a petition under section 6404(h)1

contesting respondent’s determination. The only issue for

decision is whether respondent’s denial of petitioners’ claim for

abatement of all interest accrued and assessed with respect to 

their 2000 tax liability was an abuse of discretion.

FINDINGS OF FACT

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

The stipulation of facts is incorporated herein by this

reference. Petitioners resided in Centennial, Colorado, when the

petition in this case was filed.

During 2000 petitioners withdrew a total of $175,450.31 from

two retirement plans: $42,790.81 from a pension plan, and

$132,659.50 from a section 401(k) retirement plan, both

maintained for the benefit of Mrs. Guerrero. At the time

petitioners withdrew the funds, Mrs. Guerrero had yet to retire,

nor was she otherwise eligible to permanently withdraw funds from

either plan without incurring a 10-percent additional tax for

premature pension plan distributions pursuant to section 72(t). 

Petitioners did not roll the withdrawn funds into an individual

retirement account (IRA) within 60 days of the withdrawal dates. 
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2Although the parties stipulated that petitioners reported

$89,289 as the amount of taxable income, petitioners’ tax return

shows this amount to be $89,743.

3As of the date of trial, respondent had not located the

note, and petitioners did not retain a copy of it.

Instead petitioners used a portion of the withdrawn funds to

purchase a new home in Denver, Colorado, and invested the

remainder in the stock market.

Petitioners received a Form 1099-R, Distributions From

Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs,

Insurance Contracts, etc., for each of the withdrawals. Both

Forms 1099-R listed the amount of the gross distribution in box 1

as the taxable amount in box 2a. The “Total distribution” box in

2b was checked, and the “Taxable amount not determined” box was

left blank on both Forms 1099-R.

Petitioners filed a joint individual income tax return for

2000. They reported total pension and annuity distributions of

$175,450, but they only reported $89,743 of that amount as

taxable income.2 Petitioners also claimed an IRA deduction of

$34,233 and a refund of $11,586. Petitioners testified that they

had attached a note to their 2000 return requesting that the

Internal Revenue Service (IRS) review their return, correct any

reporting errors, and recalculate their tax liability as

necessary.3
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On May 24, 2001, respondent sent a letter to petitioners

requesting an explanation of the IRA deduction. In an undated

response Mr. Guerrero conceded that the IRA deduction was

erroneous, and he asked the IRS to recalculate petitioners’ 2000

income tax liability. The IRS did so and sent petitioners a

notice dated July 23, 2001, advising them of their corrected

income tax liability based on petitioners’ concession. According

to the notice petitioners had overpaid their corrected income tax

liability for 2000 by $737.46, which the IRS refunded to them.

Less than a year later, on April 22, 2002, respondent issued

to petitioners a CP-2000 Notice proposing further changes to

their 2000 return. As reflected on the notice, respondent

increased petitioners’ taxable pension and annuity income by

$85,706, the amount petitioners had asserted was not taxable on

their original 2000 return. The CP-2000 also made a

computational adjustment decreasing petitioners’ personal

exemptions, determined that petitioners owed additional income

tax of $39,988, proposed a 10-percent early withdrawal penalty

pursuant to section 72(t) of $8,571 and an accuracy-related

penalty pursuant to section 6662(a) of $7,998, and determined

that petitioners were liable for interest accrued through May 22,

2002, pursuant to section 6601, of $3,735.

On July 15, 2002, respondent issued to petitioners a notice

of deficiency for 2000. Petitioners did not petition the Tax
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Court in response to the notice of deficiency. On December 16,

2002, respondent assessed the income tax deficiency, penalties,

and interest against petitioners (the unpaid tax liability).

On March 27, 2003, respondent mailed notices of intention to

levy to petitioners. In June 2003, petitioners filed an offerin-compromise with respect to the unpaid tax liability based on

doubt as to liability. On November 12, 2003, respondent

terminated his consideration of petitioners’ offer-in-compromise

because petitioners did not submit information that had been

requested 3 months earlier.

On May 21, 2004, respondent levied upon Mr. Guerrero’s wages

to satisfy the unpaid tax liability. That same day Mr. Guerrero

met with Mr. Quinones, an IRS collection agent. Mr. Guerrero

gave Mr. Quinones a check for $40,000 in part payment of

petitioners’ unpaid tax liability in exchange for a release of

the levy and a commitment to enter into a payment plan for the

unpaid balance. Mr. Quinones accepted the payment, released the

levy, and created a payment plan for petitioners that required

them to pay $115 per month.

On June 6, 2004, petitioners requested help from the IRS

Taxpayer Advocate’s Office with respect to the abatement of

assessed penalties and interest. On July 7, 2004, the taxpayer

advocate forwarded a Form 843, Claim for Refund and Request for

Abatement, to the IRS on petitioners’ behalf. In the Form 843
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petitioners requested that respondent abate the accuracy-related

penalty and all interest accrued on their 2000 tax liability. 

Respondent subsequently abated the accuracy-related penalty and

an addition to tax for failure to pay that had been assessed on

September 27, 2004, but denied petitioners’ request for interest

abatement. The request was denied on the ground that the record

did not disclose any unreasonable error or delay in performance

of a ministerial or managerial act by an officer or employee of

the IRS. On October 19, 2004, respondent issued a notice of

final determination to petitioners.

On April 13, 2005, petitioners’ imperfect petition seeking

review of respondent’s determination not to abate interest under

section 6404 was filed. Because the petition did not meet the

requirements of Rule 281(b), we ordered petitioners to file a

proper amended petition by June 2, 2005. On June 1, 2005,

petitioners’ amended petition was filed.

OPINION

Under section 6404(e)(1) the Commissioner may abate part or

all of an assessment of interest on any deficiency or payment of

income tax to the extent that any unreasonable error or delay in

payment is attributable to erroneous or dilatory performance of a

ministerial or managerial act by an officer or employee of the

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

does not involve the exercise of judgment or discretion and
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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, 150 (1999); sec. 301.6404-2(b)(2), Proced. & Admin. Regs. 

The mere passage of time does not establish error or delay in

performing a ministerial act. See Cosgriff v. Commissioner, T.C.

Memo. 2000-241 (citing Lee v. Commissioner, supra at 150). 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, or other applicable

Federal or State laws, is not a ministerial or managerial act. 

See sec. 301.6404-2(b), Proced. & Admin. Regs. 

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 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. 

Section 6404(e) affords a taxpayer relief only if no significant

aspect of the error or delay can be attributed to the taxpayer

and only after the Commissioner has contacted the taxpayer in
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writing about the deficiency or payment in question. See H.

Rept. 99-426, supra at 844, 1986-3 C.B. (Vol. 2) at 844 (“This

provision does not therefore permit the abatement of interest for

the period of time between the date the taxpayer files a return

and the date the IRS commences an audit, regardless of the length

of that time period.”).

The Commissioner’s authority to abate an assessment of

interest involves the exercise of discretion, and we must give

due deference to the Commissioner’s discretion. Woodral v.

Commissioner, 112 T.C. 19, 23 (1999); Mailman v. Commissioner, 91

T.C. 1079, 1082 (1988). In order to prevail petitioner must

prove that the Commissioner abused his discretion by exercising

it arbitrarily, capriciously, or without sound basis in fact or

law. Woodral v. Commissioner, supra at 23; Mailman v.

Commissioner, supra at 1084; see also sec. 6404(h)(1); Rule

142(a). We have jurisdiction to decide whether the Commissioner

abused his discretion under section 6404(h)(1).

At trial petitioners disputed all interest accrued on their

2000 tax liability. Section 6404(e) requires a direct link

between the error or delay and the specific time period during

which interest accrued. See Braun v. Commissioner, T.C. Memo.

2005-221. A request demanding abatement of all interest charged

does not satisfy the required link; it merely represents a

request for exemption from interest. Id.; see also Donovan v.
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Commissioner, T.C. Memo. 2000-220. Such a broad claim extends

beyond the intention of the statute. See H. Rept. 99-426, supra

at 844, 1986-3 C.B. (Vol. 2) at 844; S. Rept. 99-313, supra at

208, 1986-3 C.B. (Vol. 3) at 208. Respondent’s failure to abate

interest based on petitioners’ blanket request was not an abuse

of discretion. See Donovan v. Commissioner, supra.

In their posttrial memorandum petitioners argue that

interest should be abated because they requested the Secretary to

recalculate their income tax liability for 2000, and the

Secretary had all required Forms 1099 and other information to do

so accurately and promptly. Petitioners contend that the act of

processing their 2000 return accurately was a ministerial act. 

We disagree. The processing and evaluation of their income tax

return required the application of Federal tax laws, which was

not a ministerial or managerial act. 

In this case respondent did not learn that petitioners’ IRA

deduction was erroneous until after he had contacted petitioners

and requested information concerning the deduction. After

petitioners conceded the deduction was erroneous, respondent

promptly recalculated petitioners’ 2000 income tax liability and

notified them of the results. Less than 1 year later, respondent

again contacted petitioners regarding their failure to treat the

entire amount of the retirement distributions as taxable income. 

Again respondent acted promptly to determine petitioners’ correct
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income tax liability, and he issued a notice of deficiency

reflecting his determination before the period of limitations for

assessment provided by the Internal Revenue Code had expired. 

Each of these adjustments required respondent to apply Federal

income tax law to facts that petitioners provided. None of

respondent’s adjustments to petitioners’ 2000 return constituted

a ministerial or managerial act within the meaning of section

6404(e). 

In this case it was petitioners’ own mistakes that caused

the delay in correctly calculating petitioners’ 2000 income tax

liability. Section 6404(e) permits an abatement of interest only

when the interest is not attributable to error or delay by the

taxpayers. Moreover, most of petitioners’ argument is directed

to respondent’s perceived delay in identifying petitioners’

mistakes and correcting them. However, section 6404(e) does not

authorize the abatement of interest from the due date of the

return until the Commissioner contacts a taxpayer in writing with

respect to the deficiency. In this case respondent did not

contact petitioner in writing with respect to the 2000 income tax

deficiency until April 22, 2002. Respondent’s failure to abate

interest from the date petitioners’ return was filed to April 22,

2002, was not, and under section 6404(e) cannot be, an abuse of

discretion. See sec. 6404(e); Donovan v. Commissioner, supra; H.

Rept. 99-246, supra at 844, 1986-3 C.B. (Vol. 2) at 844.
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4Petitioners claim that one of respondent’s employees

informed petitioners over the telephone that they would not incur

the 10-percent early withdrawal penalty pursuant to sec. 72(t) on

the funds used to build their house, nor would they have to

report those funds as taxable income. However, the record

suggests that petitioners may not have given the employee

complete and accurate factual information regarding the house

they were building or the source of the funds.

Petitioners also argue that their incorrect reporting was

attributable, in part, to erroneous advice they received from

respondent’s agent.4 However, such advice, whether accurate or

not, contains the legal or administrative judgment of the person

giving the advice and is not a ministerial or managerial act. 

See Crawford v. Commissioner, T.C. Memo. 2002-10; sec. 301.6404-

2(b), Proced. & Admin. Regs. Respondent did not abuse his

discretion by refusing to abate interest arguably attributable to

his agent’s erroneous advice.

Petitioners do not persuade us that respondent abused his

discretion in refusing to abate interest after April 22, 2002,

when respondent sent petitioners his proposed changes to their

2000 return. Petitioners simply argue that had respondent acted

more promptly in assessing their correct 2000 income tax

liability, petitioners would have paid it earlier, and, as a

result, they would not have incurred interest charges. 

Abatement of interest is not appropriate simply because a

taxpayer might have made a tax payment sooner. See Braun v.

Commissioner, T.C. Memo. 2005-221. Respondent had determined
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that petitioners owed approximately $40,000 of additional tax as

a result of their underreporting of Mrs. Guerrero’s retirement

plan distributions. Petitioners presented no evidence that they

would have paid their additional tax liability sooner if

respondent had notified them of it earlier. In fact the record

demonstrates the contrary. Petitioners received a notice of

deficiency dated July 15, 2002, but they did not make any

substantial payment toward the deficiency until respondent levied

upon Mr. Guerrero’s wages in May 2004. 

A careful review of the record in this case fails to

disclose any erroneous or dilatory performance of a ministerial

or managerial act by an officer or employee of respondent with

respect to petitioners’ 2000 return. Consequently, we hold that

respondent’s determination denying petitioners’ claim for

abatement of all interest accrued with respect to petitioners’

2000 income tax deficiency was not an abuse of discretion.

To reflect all of the above,

Decision will be entered

for respondent.