TAX COURT OPINION

Case: Tan Xuan Bui
Docket Number: 3233-06
Judge: Marvel
Opinion Type: memo
Filed: 04/30/2007
Pages: 10

T .C . Memo . 2007-104 UNITED STATES TAX COUR T TAN XUAN BUI, Petitioner v . C OMMISSIONER OF INTERNAL REVENUE , Responden t Docket No . 3233-06 . Filed April 30, 2007 . WarreniNemiroff , for petitioner . Guy H . Glaser , for respondent . MEMORANDUM OPINIO N MARVEL, Judge : This case is before the Court o n respondent's motion for summary judgment, filed pursuant to Rul e 121 .1 1 All R le references are to the Tax Court Rules of Practice and Procedur , and all section references are to the Internal Revenue Code SERViD APR 3 0 2007 - 2 - Backgroun d This case involves an appeal from respondent's determination that petitioner is not entitled to an abatement of interest under section 6404(e)(1) . When the petition in this case was filed, petitioner resided in Fountain Valley, California . Petitioner timely filed his 1997 and 1998 Federal income tax returns . Respondent selected the returns for examination . After examining the returns, respondent concluded that petitioner had unreported income and had improperly deducted travel expenses . Accordingly, on March 21, 2001, respondent issued a notice of deficiency to petitioner in which he determined deficiencies of $48,206 and $11,672 for 1997 and 1998, respectively . Additionally, respondent determined that petitioner was liable for penalties under section 6662(a) of $9,513 .40 and $2,224 for 1997 and 1998, respectively . On June 11, 2001, petitioner filed a petition seeking a redetermination of the deficiencies and penalties set forth in the .notice of deficiency . Trial was set for January 28, 2002 . On February 1, 2002, a decision reflecting a settlement between petitioner and respondent (settlement) was entered by the Court . Under the terms of the settlement, respondent conceded the deduction for travel expenses , and petitioner conceded the unreported income and the section 6662(a) penalties . The decision contained a stipulation that interest would be assessed on he deficiencies and penalties due from petitioner as required by law . On Au ust 6, 2002, petitioner submitted a Form 656, Offer in Compromise to respondent based on doubt as to liability in which petitioner offered to pay the deficiencies but not any penalties or statuto y interest . On September 18, 2003, respondent sent petitioner a letter rejecting the offer . On Fe ruary 6, 2005, petitioner submitted a Form 843, Claim for Refund and Request for Abatement (request), with respect to the sectio 6662(a) penalties and the accrued interest . On August 31, 2005, respondent sent a letter to petitioner stating that':respo dent would not review the portion of the request relating to the abatement of the assessed penalties . On October 17, 2005, r spondent sent petitioner a 30-day letter stating that petitioner' request had been denied on the grounds that "There was no unre sonable error or delay relating to the performance o f a miristeri 1 or managerial act in processing the examination of your return " Petitioner did not respond to the 30-day letter . On a date t at cannot be ascertained precisely from the record, but which t e parties allege was either December 1 or December 5, 2005, respo dent issued a notice of final determination denying petitioner's request under section 6404(e)(1) . - 4 - On February 13, 2006, petitioner timely filed a petition under section 6404(h)2 seeking review of respondent's determination . Petitioner asserted that the manner in which respondent conducted his examination prevented petitioner from divulging information relating to his tax liability .3 Petitioner argued that if he had trusted respondent and had felt comfortable in disclosing the necessary information, petitioner would have settled his case years ago without penalties and with far less accrued interest . On August 10, 2006, respondent's motion for summary judgment was filed . In his motion, respondent asserts that the Court does not have jurisdiction under section 6404(h) to decide whethe r respondent properly assessed the section 6662(a) penalties . Respondent also argues that petitioner failed to produce evidence that respondent was unreasonably dilatory in performing a ministerial or managerial act as required by section 6404(e)(1) . Respondent urges us to sustain respondent's determination denying petitioner's request . 2 Sec . 6404 was amended by the Internal Revenue Service Restructuring and Reform Act of 1998, Pub . L . 105-206, sec . 3305(a), 112 Stat . 743 . One of the changes redesignated forme r sec . 6404(g) as sec . 6404(h), effective for tax years ending after July 22, 1998 . 3 Petitioner chose not to disclose information because he feared that disclosure of the information would cause various members of his family to be audited . - 5 - On S e tember 8, 2006, petitioner's response opposin g respondent ' s motion was filed . Petitioner concedes the section 6662(a) pe alties9 but maintains that the request was improperl y denied wi t respect to interest . Petitioner also argues that the manner in w ich respondent conducted his examination unreasonably delayed the settlement of petitioner's case and prolonged th e period dur i which interest accrued . Petitioner asserts tha t his testimo y at trial would establish the impropriety of the audit cond u ted by respondent, but petitioner did not submit an affidavi t support of his position in opposition to respondent' motion . On Fe b uary 5, 2007, the Court held a hearing o n respondent' summary judgment motion . Representatives for both parties wer present and were heard . Discussio n I . Su mm ar Judgmen t Summary judgment is a procedure designed to expedite litigation a d avoid unnecessary, time-consuming, and expensive trials . Fla . Peach Corp . v . Comm issioner, 90 T .C . 678, 681 (1988) . Su ary judgment may be granted with respect to all or any part of he legal issues presented "if the pleadings, answers to interroga ories, depositions, admissions, and any othe r In his opposition to the motion for summary judgment, petitioner e illicitly states that he will not contest the imposition o the sec . 6662(a) penalties . - 6 - acceptable materials, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law ." Rule 121(a) and (b) ; Sundstrand Corp . v . Commissioner , 98 T .C . 518, 520 (1992), affd . 17 F .3d 965 (7th Cir . 1994) ; Zaentz v . Commissioner , 90 T .C . 753, 754 (1988) . The moving party bears the burden of proving that there is no genuine issue of material fact, and factual inferences will be drawn in a manner most favorable to the party opposing summary judgment . Dahlstrom v . Commissioner , 85 T .C . 812, 821 (1985) ; Jacklin v . Commissioner , 79 T .C . 340, 344 (1982) . The nonmoving party, however, cannot rest upon the allegations or denials in his pleadings but must "set forth specific facts showing that there is a genuine issue for trial ." Rule 121(d) ; Dahlstrom v . Commissioner , supra at 820-821 . II . Abatement of Interest Under Section 6404(e)(1 ) Under section 6404(e)(1), the Commissioner may abate part or all of an assessment of interest on any deficiency to the extent that any unreasonable error or delay in payment is attributable to erroneous or dilatory performance of a ministerial o r managerial act by an officer or employee of the Internal Revenu e Service . A ministerial act is a procedural or mechanical act that does not involve the exercise of judgment or discretion and that occurs during the processing of a taxpayer's case after all prerequisites to the act, such as conferences and reviews by - 7 - sup rvisor , have taken place . Lee v . Comm issioner , 113 T .C . 145,,,150 ( 999) ; sec . 301 .6404-2 ( b)(2), Proced . & Admin . Regs . A managerial act is an administrative act that involves a temporary or permane t loss of records or the exercise of judgment o r discretion elating to management of personnel during the processing f a taxpayer ' s case . Sec . 301 . 6404-2 ( b)(1), Proced . & Admin . Re s . A decision concerning the proper application of Federal tax law is neither a ministerial nor a managerial act . Sec . 301 . 64 4-2 ( b)(1) and ( 2), Proced . & Admin . Regs . A request for an abat ment of interest will not be granted if a significant aspect of t e delay is attributable to the taxpayer . Sec . 6404(e)(1) . ,When C ngress enacted section 6404(e), it did not intend the provision t be used routinely to avoid payment of interest . Rather , Con ress authorized abatement of interest only where failure to d so "would be widely perceived as grossly unfair ." H . Rept . 99- 26, 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 . Under section 6404 ( h)(1), we have jurisdiction to determine whether respondent a used his discretion in denying petitioner ' s request . Because the o mmissioner ' s abatement authority involves the exercise of iscretion , however, we must give due deference to the Co mm issi ner's determination . Woodral v . Comm issioner , 112 T .C . 1:9, 23 1999 ) ; Mailman v . Commissioner , 91 T .C . 1079, 1082 - 8 - (1988) . In order to prevail, petitioner must prove that respondent 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) . In his response in opposition to respondent's motion, petitioner asserted that he was the subject of an abusive, duplicitous, bad faith, and racist audit conducted to intimidate him and to discover assets belonging to his family . However, petitioner did not set forth specific facts in or attach any documents to his response that showed a genuine issue of material fact for trial . Instead, petitioner rested on the allegations in his petition and in his response . Such allegations are simply not enough to withstand a motion for summary judgment . See Rule 121(d) . Petitioner's factual assertions do not establish that there is any dispute about a material fact in this interest abatement proceeding . At best, petitioner's allegations reflect a concern that his audit was improperly motivated . However, petitioner does not make any allegation of improper motivation regarding respondent's attempt to collect interest . In fact, petitioner agreed to the deficiency and stipulated that interest would be assessed on the deficiency . Petitioner has not alleged any facts to support a finding of unreasonable error or delay in payment - 9 - that is a tributable to an officer or employee of respondent's being err neous or dilatory in performing a ministerial or managerial act . On the contrary, the record indicates that an y delaythatlmay have occurred was attributable to petitioner. 5 Section 64 significan aspect of the error or delay is attributable to th e taxpayer . Fina l y, petitioner cannot successfully argue tha t respondent ' s action enforcing the terms of the settlement between petitione r and respondent was an abuse of discretion . Th e decision r e parties' s t pulation acknowledging that statutory interest would be assesse d on both the deficiencies and penalties for the years at issue a s required by law . See sec . 6601(a), (e)(2) . Respondent ssessed interest in accordance with the stipulatio n of the parties . Petitioner has failed to demonstrate that ther e 5 1 Petiti ner, who was represented by both a tax attorney an d a certified ublic accountant, failed to cooperate wit h respondent during the audit in that petitioner refused to provide informationr quested by respondent . - 10 - is a genuine issue as to any material fact or that respondent is not entitled to a decision as a matter of law . 6 III . Conclusio n We shall grant respondent's summary judgment motion with respect to petitioner's abatement claim under section 6404(e)(1) . To reflect the foregoing, An appropriate order and . decision will be entered . 6 Petitioner's claim that the settlement in his deficiency case does not speak to the issue of interest is remarkably disingenuous given the clarity of the language used in the decision : "It is further stipulated that interest will be assessed as provided by law on the deficiencies and penalties due from the petitioner ."