TAX COURT OPINION

Case: Shehzad A. Latif
Docket Number: 6271-22S
Judge: Holmes
Opinion Type: bench
Filed: 11/09/2023
Pages: 6

United States Tax Court Washington, DC 20217 SHEHZAD A. LATIF, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 6271-22S. ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the of the trial of the above case before Judge Mark V. Holmes at Hartford, Connecticut on October 3, 2023, containing his oral findings of fact and opinion rendered after the conclusion of trial. In accordance with the oral findings of fact and opinion, an appropriate decision will be entered. (Signed) Mark V. Holmes Judge Served 11/09/23 1 Bench Opinion b y Judge Mark V. Holmes 2 October 3 , 2023 3 3 4 5 6 7 8 9 Shehzad A. Latif v . Commissioner of Internal Revenue Docket No . 6271 - 22S THE COURT : The Court has decided to render oral findings of fact and opinion and the following represents the Court ' s oral f i ndings of fac t and opinion . Thi s bench opinion is made pursuan t to the authority gran t ed by section 7459(b) of the Internal Revenue Code of 1986 as 10 amended and Rule 152 of the Tax Court ' s Rules of Pract i ce 11 and Procedure . 12 13 FI NDING OF FACT Mr . Latif is a highly trained and accomplished 14 electrical engineer with a specialization in avionics and 15 t his case i s about h i s 20 18 tax year. Mr . Lat i f began t he 1 6 year at Universal Av ionics in Washington state . He had a 17 401 (k ) plan at that firm . 18 He got a great new job at Lockheed Martin here 1 9 in Connecticut , where Mr . Latif is a resident . He moved 20 across the country in May of 2018 . He tried t o bring his 21 401(k) to h i s new employer , but some t hing went wrong , and 22 though he had tried t o roll it over from one custodian to 23 another , it didn ' t work . In the end , he had to include 24 withdrawal from the old plan as part of his taxable income 25 for 2018 . IW•tii f/73) 406-22.S0 I opera.tions,~escr:ibers,net 1,,...,_.,,,_e,cribers.n et This triggered a deficiency and a penalty 4 determined by the IRS. Mr. Latif responded actively by calling the IRS and trying to resolve the problem that way. And indeed , t he reasonableness o f his behavio r was conceded by the IRS and the penalty was el i min ated. Mr. Latif then paid t h e extra tax, but thinks that because his behavior was reasonable , under the circumstances, the interest on that tax should be abated. OPINION 1 2 3 4 5 6 7 8 9 10 In tax lingo, what he 's asking fo r is an 11 interest abatement. Interest abatement is governed by 12 section 6404 of t h e Code, which allows a taxpayer to 13 q.., c h allenge ~ refusal by the IRS to abate interest in Tax MH / 14 Court. See Section 6404 (h) . 15 These cases are a rela t ively small part of the 16 Tax Court's docket, and we still haven't quite figured out 1 7 some of the underlying ways that we should analyze these. 18 The standard of review in these cases is clearly abuse of 19 discretion. It says so in the statute. 20 The scope of review might well end up being 21 limited to an administrative record prepared by the 22 Commissioner, but we had a trial in this S case anyway and 23 truly, the difference in scope of review between l ooking 24 at the administrative record and lo oking at the results of 25 the trial wouldn't make a difference in this case. J 1.ii·WM ~73) 406-2250 I operations(aie~tibarrnet I ,,..,.,.,,_escribers.n et 5 So let me begin by taking a l ook at section 6404 of the Code . That section s t a t es : " In the case o f any assessment of interest on any deficiency attributable in whole or in part , t o any unreasonable error or de l ay by an officer or employee of the Internal Revenue Service acting in his official capacity in performing a ministerial or managerial act , or any payment of any tax described in section 6212(a) to the extent that any unreasonable erro r or delay in such payment is attributable to such officer or emp lo yee being erroneous or dilatory in performing a ministerial or managerial act the Commissioner can abate interest. " The key phrase here is that the interest has to 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 have accumulated because of a delay caused by an IRS 17 employee in the performance of a ministerial or a 18 managerial act . The statute doesn ' t define ministerial or 19 managerial acts , but the regulations do , so let ' s turn to 20 them . 21 26 C.F . R. section 301.6404 - 2(b) (1 ) def i nes 22 manageria l act as : 23 24 25 "An administrative act that occurs during the processing a taxpayer's case involving the temporary or permanent loss of records or the tlit-i#JH (973) 406-2250 I operations@escriberrnet I •t.ww.escribers.net 1 2 3 4 5 6 7 8 9 10 11 12 13 14 to mean : exercise of judgment o r discret i on relating to 6 the management of personnel ." Similarly , 6404 - 2 (b ) (2) defines ministerial act "A procedural or a mechanical act that does not involve the exercise of j udgment or discretion and that occurs durin g the processing of a taxpayer ' s case after all prerequisites to the act , such as conferences and review by supervisors have taken place . A decision concerning the proper application of Fede ral t ax law , or ot her Federal or sta t e law is not a ministerial ac t." ,f,,fl this qualification ~ ~ = IV\ the las t sentence MH 1 5 applies to both d e fi n i t ions o f manage r i al and ministerial 1 6 acts . 1 7 That means that I have to ru l e in t he 1 8 Commissioner ' s favor in this case . Mr . Latif doesn ' t 1 9 allege any decisi ons by IRS empl oyees caused any delay 20 here . Moreover , he d oesn ' t al l ege any ministerial or 2 1 manage ria l act that caused any d elay t hat a ll owed i nterest 22 to bu i ld up . Inste ad, h is argumen t is that the fail u re of 23 his rollover , which under t he circumstances , th is would be 24 a great argument for defending h i mself against the 25 pena l ty , and e v idently the I RS thought so because it lli·WH (973) 406-2 250 I operaticns(a>escriberrnet I ½ww.escribers.n et 7 didn't determine any penalty in t he end. But interest is all about the time value of the money owed. That's why the IRS has to routinely pay interest on refunds, but also why taxpayers, why Mr. Latif, who delayed a bit in paying the extra tax they owed, have to pay interest on what they owe. My conclusion is that Decision will be entered in favor of the Respondent. This concludes the Court's oral findings of fact 1 2 3 4 5 6 7 8 9 10 and opin i on i n th i s case. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 (Whereupon, at 11:07 a.m., the abo ve-entitled matter was concluded.) lli·Mi (973) 406-2 250 I operation,rj;les,:r:ibers,net i 'hww.escriber:s.n et