TAX COURT OPINION

Case: Jean Mathia, and Estate of Doyle V. Mathia, Deceased, Jean Mathia, Personal Representative
Docket Number: 16483-05L
Judge: Marvel
Opinion Type: memo
Filed: 05/27/2009
Pages: 48

T .C . Memo . 2009-120 UNITED STATES TAX COUR T I JEAN MATHIA AND ESTATE OF DOYLE V . MAT: IA, DECEASED, JEAN MATHIA , PERSONAL REPRESENTATIVE, Petitioners v . COMMISSIONER OF INTERNAL REVENUE, Responden t Docket No . 16483-05L . (Filed May 27, 2009 . Ann L . Darnold , for respondent . MARVEL, Judge : Pursuant- to section . 6330 (d) ;' petitioners seek review of respondent's determination to proceed with the collection of petitioners' 1982, 1983, and 1984 Federal incom e 'Unless otherwise indicated, all ection references are to the Internal Revenue Code, and all Ru a references are to the Ta x Court Rules of Practice and Procedure _ .SERVU' MAY 2 7 203 - 2 - tax liabilities . Petitioners also seek review under section 6404(h) of respondent's determination to deny petitioners' request for abatement of interest .under section 6404(e) . Backgroun d 1 The parties submitted this case'fully stipulated under Rul e 122 .., The stipulation of facts is incorporated herein by this reference . Jean Mathia (Mrs . Mathia) resided in Oklahoma when sh e petitioned this Court on her own behalf and as personal representative of the Estate of Doyle V . Mathia, her deceased husband . Doyle V . Mathia (Mr . Mathia) and Mrs . Mathiaa wer e married and filed joint Federal income tax returns for all r~ . relevant years . Mr . Mathia died on February 19, 2000 . Mr .. Mathia was a limited partner in Greenwich Associate s (Greenwich), a New York limited partnership subject to the I unified audit and litigation procedures of the Tax Equity and Fisgal Responsibility Act of 1982 (TEFRA), Pub . L . 97-248, sec . 40'!2(a!), 96 Stat . 648, for the relevant tax years . Greenwich was one of approximately 50 partnerships,, and joint venture s I''part,i,cipating in coal programs sponsored by the Swanton'', ,Corp ., a Delaware corporation (collectively referred to as th e Swanton partnerships;) . We use the term "petitioners" throughout this opinion to Irefer .to Mr . Mathia or his estate and Mrs . Mathia . 3 - Thirty of .the-Swanton partnership were formed-before th e enactment of TEFRA . The remaining 20 Swanton partnerships, : including . Greenwich, were formed after the enactment of TEFRA and are subject to the TEFRA unified audi t and litigation prov'i'sion s applicable to .partnerships (Swanton TE RA . partnerships) . i Mr . Mathia owned an 8 .484-percen t limited partnership interest . in Greenwich at all relevant imes .3 Mr . Mathia was neither a section 6223 .(a) notice partn r nor a member of a notic e I group described under section 6223(b) ( Kevin Smith (Mr . Smith) served as the general partner and tax matters' partner (TMP) .of Greenwich Neither Mr .-Mathia nor Mrs . Mathia notified respondent that M fir . Smith did not hav e authority-to enter into a settlement a greement on their behalk . 3Mrs . Mathia',' individually, was n ver a partner in Greenwich . 4Under sec . 6223(a) ., a partner is not entitled(cid:127)to notice ; unless the Secretary receives sufficient information to determine whether the partner is entitled .to the notice and to enable, the Secretary to provide the notice to the partner . 'Under sec . 6223(b)(2), if a partnership has more than 100 partners, a group of partners having a 5-percent or mor interest in the profit's of the partnership can request that one of their members receive th e notice . The parties-stipulated that M notice partner nor a member of a noti Greenwich tax matters partner (TMP) ha Greenwich's partners to the stipulati Respondent subsequently moved for reli stipulations, alleging . that they were Opinion filed as T .C . Memo . 2007-4, w was not entitled to relief from the st r . Mathia was neither a~ e group and that th e d authority to bind all of n of ssettlement . ef from the designate d in error .. In a .Memorandum concluded that respondent ipulations . _l 1 ..Respondent determined that the only purpose of the Swanton partnerships was to generate tax deductions . On or befor e +'March!k16, 1987, Greenwich received ailPnotice of the beginning'of i an :administrative .proceeding (NBAP)(cid:127)for tax years 1982 ,!l 983, and 1984 .5 On August 3, 1990, . respondent issued to Greenwich a .notice of final partnership administrative adjustments( .FPAA) for it 11 11 1982,,1983, and 1984 . Mr . Smith timely filed a petition fo r it review in this Court under section 6226 (the Greenwich :f lit igation ) In the Greenwich litigation Greenwich was represented by HenrygG . Zapruder -(Mr . Zapruder) and Matthew Lerner (Mra' ., Lerner) of : Zapruder .& Odell, a law firm that [served as counsel, .for most it of,'the- :.Swanton TEFRA partnerships .6 In or about September 199 1 !,,!respondent' s attorneys and Zapruder & Odell reached an agreement in principle regarding the parameters of a settlement wit h ,respect to 19 of the 20 Swanton TEFRA partnerships, including Greenwich (1991 agreement) . The 1991 agreement was reflected i n ani .exchange of letters between Zapruder .&'Odell on behalf of the pa r'tn e'rships and respondent's attorneys, Robert Marino and Moir a The record does not indicate the precise date onwhic h respondent issued Greenwich the NBAP . " 6In the attachment to notices of determination dated Aug . 5, (2005;i,,1i!jissued by the Appeals Office with respect to the lien and proposed levy, the Appeals Office states that Mr . Lerner did not "represent Greenwich . We find to the contrary on=the basis of the stipulations of the parties . - . 5 Sullivan (Ms . Sullivan) . Included in he 199.1 agreement was a requirement that the TMP for each, part ership sign a Rule 248(a ) decision document .' After respondent's attorneys and- apruder & Odell . reached the 1991 agreement, they,continued to negotiate aspects of the proposed settlement . They also began he process of applying the general terms to each partnership and Partner . That process H included gathering and exchanging information to enabl e respondent to calculate partnership-level adjustments and each partner's distributive share adjustment,. preparing reports showing the calculations, and preparing and executing decision- documents that-memorialized the terms of-the proposed settlement with respect to each Swanton partnership as well as closing . agreements as appropriate . I By letter dated January 10, 1992 ., Zapruder & Odell regiue'sted that respondent "designate someone * * to administer the settlement of the Swanton cases ." By letter dated January 15 , i 1992, respondent's counsel advised Za ruder &'Odell that respondent had assigned another attor ey, Frances Chan, to immediately effectuate the settlement of the Swanton Partnerships ." Respondent's counsel also requested verification 7Rule 248(a) states that "A stipulation consenting to entry of decision executed by the tax matters partner and filed with the Court shall bind all parties ." U der Rule 248(a) the TMP's signature certifies that no party obj~cts to entry of decision . If iI -- 6 - Ii of each partner's investment in the 19 Swanton TEFRA partnerships that'!agreed to move forward with the settlement . P ,',,In July 1995 respondent sent toljMr . Lerner and Mr . Smith letters enclosing the following documents with respect to the Greenwich litigation : (1) The decision document reflectin g adjustments to partnership items for ;, each of the years 1982, 1983,,.and 1984 ; (2) the computations on which the decision document was based ; (3) ., closing agreements for some of th e ;Greenwich limited partners ;I and (4) . Forms 886Z (C), Partner's o r S Corporation Shareholders' Shares of Income . Respondent 'informed Mr . Lerner9 and Mr . Smith that limited partners i n Greenwich seeking treatment deviating from the adjustments in the decision document needed to sign individual closing agreements before the decision document could be filed with the Court . Th e Aleltter'also stated the following : ij 8By letter dated sometime in July 1995, Ms . Sullivan sent to Mr .'Lerner a revised closing agreement for one of the Greenwich limited partners . On that same date,, . Ms . Sullivan mailed copies ofNN11 amended closing agreements to Mr . Smith so that Mr . Smith could arrange for execution of the agreements by the affected partners . 11.9Although Mr . Lerner remained one of-Greenwich's counsel of record until November 1999, he apparently left Zapruder & Odell in' May 1996 . Mr . Lerner . withdrew from the Greenwich litigation in' 1999 . Please understand that your signing each partnerships' [sic] Decision Docu tents constitutes the offer to settle that particular p rtnership with the Internal Revenue Service and the ountersignature of the documents constitutes the Int rnal Revenue Service's acceptance of that offer . No settlement of any partnership will be final .unt'1 these documents are countersigned by the Internal Rev,nue Service . On September 11, 1996, Mr . Smith signe the decision document. On September 25, 1996, Mr . Lerner signed the decision documen t and returned it to respondent's attorn ys that same day . By letters dated July 17 and November 7, 1996, Greenwich' s counsel mailed executed closing agreemlents with respect t o Greenwich to Ms . Sullivan . Although none of the letters i n the record disclosed how many of the Gree n wich limited partners ; wer e required to sign closing agreements, tl he attachment to the notices of determination stated that seven partners were require d to .rexecute closing agreements before the Greenwich decision' document could be signed by responder . Mr . Mathia was not: one of them .10 The attachment also stated that the closing agreements were dated from November l 1999, to November 27 , 2000, but did not identify the date t which .i-t referred (e .gl . date of receipt, date executed by taxpayer, date executed by I respondent ' s agent, effective date ) ." The stipulated record ; "Mr . Mathia did not execute a closing agreement, and his wife did .not execute one on his behal . "The attachment further states t at "The most significant delays encountered with this partners ip were both in contacting (continued . . .) - 8 - jdoes not explain why the closing agreements were dated in 1999 4and'2000 when they were mailed to respondent in 1996 .1 2 By letter dated February 27, 2001, . Ms . Sullivan sent anothe r decision document with respect to the Greenwich litigation and the' computations on which the decision document was based to Mr . Za'pruder .' The decision document was,,; identical to the one mailed Ito Greenwich in 1995 . In the letter Ms . Sullivan asked Mr . ,lZapruder to sign the document, to have Mr ._ Smith sign the document, and to return the signed decision document to her . Ms . . Sullivan represented that as soon as respondent's counsel received the signed decision document, they would get it countersigned and file it immediately with the Court . Ms . Sullivan also described what would happen after the decision was ,entered by the Court, and she warned Mr . Zapruder that his signature on the decision document "constitutes the offer t o ,, settle" and that the countersignature "constitutes the Internal i',Revenue Service's acceptance of that offer ." The stipulated 11 ( . .continued ) ~the'tax matters partner, Smith, and receiving his signed 906's ." lHowever, we can find no evidence in the record other than the .conclusory statement in the attachment to support a finding that Lithe ;delay in executing the closing agreements was attributable to ;either Greenwich's TMP or its counsel . 12In 2004 Appeals Officer Troy Talbott attempted tol3 :find out the date by which the Internal Revenue Service had received all of the Forms 906, Closing Agreement on Final Determination ,_Co,iyering Specific Matters, for Greenwich, but he was apparently unable' to do so . 9 - record does not contain any explanation as to why a secon d decision document was mailed to Greenw .ch''s counsel after the ' had already delivered the executed original of the first decisio n document to Ms . Sullivan on September ;-25,° 1996 . On August 30', 2001, respondent co ntersigned the decision document and submitted it to'this Cour . The Court filed the ; decision document on August 31, 2001, ,s a stipulation o f settlement (Greenwich stipulation)' . (cid:127)O September 7, 2001, this Court issued an order to show cause, directing Mr .'.' Smith tc~~ f ile a written response showing cause as to why'the Court should!no t enter a decision in accordance with the terms of the Greenwic h stipulation . Mr . Smith did not file a -response , .and on January 17, 200 .2, this Court entered an order and decision resolving'th e Greenwich litigation . On April .17, 2 0 02, the decision became final . On September 27, 2002, respondent mailed petitioners a!: Form 4549A-CG, ..Income Tax Examination Changes, notifying-them of ; al' computational adjustment" to their 1983 income tax liability a s a result of the resolution of the Greenwich litigation : On January 8, 2003, respondent notified petitioners 'of adjustme n'ts' to their 1982 and 1984 income tax liabilities . Petitioners di d 13A computational adjustment chanes the tax liability, of ; a partner to properly reflect the treat lent of a partnership,' item . Sec . 301 .6231(a)(6)-1T, Temporary Pro~ed . & Admin . Regs ., 52 Fed . Reg .. 6790 (Mar . 5, 1987),-amended 64 ed .'Reg . 3840 (Jan 26, 1 . 1999) . it i! 10 - n t„agree,to,waive or extend any . period of limitations [,for th e iassessment of their,1982, 1983, or 1984 tax liability . ! I 9 'January 27, 2003, respondent assessed against . petitioners . the income tax deficiencies and interest for 1982, 1983, and 198 4 ,attributable to the computational adjustments . On October 27, 200.3, petitioners paid all of the tax, but not the interest, that 1i respondent had assessed .14 - I ~ ),IlpOn(cid:127),February 6, 2004, petitioners submitted Forms 843, Claim for. Refund . and Request for Abatement, requesting an abatement o f !the ;; interest accrued on their 1982, 1983, and 1984 ,income tax Ili 'abilities under section 6404 . ~'~'On February 10, 2004, respondent issued to petitioners' a Final,; Notice--Notice of Intent to, Levy and Notice of Your Right to a-Hearing for 1982, 1983, and 1984, and petitioners timely j0 requested a section 6330 hearing . On April 2, 2004, responden t issued to petitioners a Notice of Federal . Tax Lien , Filing an d 1i, Your Right to a Hearing Under IRC 6320, ,,, for, 1983. and 19 .84, and ,;petitioners timely requested a section 6320 hearing . On April 7, 2004,,respondent denied petitioners ' interest abatement .claim . On,May 5, 2004 , petitioners submitted'jFa reques t ,to=respondent's Appeals Office to review the denial of their Iv ,interest abatement claim . iLI ;4Petitioners paid $149,360, $4, ;015, and $2,331 , !respectively, towards their 1982, 1983, and 1984 tax liabilities . 7 - 11 - On October 15, 2004, Mrs . Mathia , acting individually,j .le d a Form 8857, Request for Innocent .Spo u se Relief, wherein sh e sought-relief under section 6015 from joint and several liability for all tax liabilities attributabl e Greenwich for 1982, 1983 , and 1984 . On July 8, 2005, responden t granted<Mrs . :Mathia' s request for relief . On August 5, 2005, respondent issued to petitioners a notice of determination with respect to*the notice of 'intent(cid:127)to levy an d a second notice of determination~,with (respect to the notice ; o f .Federal tax lien filing On August l81~ 2005 respondent issued a final determination letter to petitioners denying petitioner s request for abatement of . .interest and r sec.tion° .6404 . The if i al determination did not set forth any f ctsto explain the 5-ye ia r delay :between the execution of the decision by the Greenwich TM P and counsel and the .execution of=the decision on behalf of respondent . . .The final .determination . imply stated that " .We dlo not find any .errors .or delays on our art that :merit the abatement of interest in our 'review of available records and l other information :'' On September 6, 2005, petitioners timely filed a petition s. it . contesting each of respondent 's determinations . Petitioners, contend that under section 6229(f), t e period for assessmen t expired before respondent'assessed pe itioners' 1982, ; 1983,,1 and 1984 tax liabilities . Alternatively, - 12 - respondent improperly denied their interest abatement claim s uderr sections 6404 and 6621(d) . 11 Discussion . Determination To Proceed With Lien and Levy Section 6330(d) Revie w Under section 6320(a) the Secretary15 is required to notif y the 1,i taxpayer in writing of the ; filing of a Federal tax :lien and inform the taxpayer of his right to a hearing . Section 6330(a) similarly provides that no levy may be=made on a taxpayer' s prope ;rty or right to property unless,the Secretary notifies the taxpayer in writing of,his right to .a hearing before the levy is made ..-; If the taxpayer requests a,hearing under either~tsection 6320,or 6330, a hearing shall be held before an impartial officer or°employee .of the Internal Revenue Service (IRS) Office of Appeals, ." Secs . ;6320 (b) (1) , (3) , 6330 (b) (1) ; (3) . At i6th e hearing a taxpayer may raise any relevant'issue, .including .appropriate spousal defenses, . challenges to the appropriateness 15The term "Secretary" means "the Secretary of the Treasury or his delegate", sec . 7701(a)(11)(B), and the term "or his delegate" means "any officer, employee, or agency of the Treasury Depa'rtment'duly'authorized by the Secretary of the Treasury directly, or indirectly by one or more redelegations of, authority, to perform the function mentioned or described in the context", sec . 7701(a)(12)(A) . 16Sec . 6320(b)(4) provides that ;.eo,the extent practicable, a 'hearing under sec . 6320 should be held in conjunction with a sec . 6330 hearing, and sec . 6320(c) . provides that sec . 6330(c), (d ) { (other than par . ' (2) (B)) , and (e) applies for purposes of the sec . ' 6320 hearing . - 13 - of the collection action, and collecti n alternatives . Sec . 6330(c)(2)(A) . A taxpayer is precluded from contesting the existence or amount of the underlying ax liability unless the taxpayer did not receive a notice of d ficiency for the tax in question or did not otherwise have an opportunity to dispute th e .tax liability . Sec . 6330(c)(2)(B)' ;'seo also Secro v . Commissioner , 114 T .C . 604 ; 609 (2000 ) Following a hearing the Appeals Office must determine whether the Secretary may proceed with the proposed-collection i action . In so-doing, the Appeals Offi e is required to consider : (1) The verification presented by the ecretary that the requirements of applicable law and adm'nistrative procedures have been met ; (2) the relevant issues rais d by the taxpayer ;, and (3) whether the proposed collection action appropriately balanc e'slthe need for efficient collection of taxes with a taxpayer's concerns regarding the intrusiveness of the . pro Dosed collection action . Sec . 6330 (c) (3 ) Section 6330(d)(1) grants the Court jurisdiction to review the" determination made by-the-Appeals Officer Where the underlying tax liability is not in di pute,, .the Court will revie w .that determination for abuse of disci tion . Lunsford v . Commissioner , 117 T .C . 183', 185 (2001) ; Sego v . Commissioner , supra at 610 ; Goza v . Commissioner , 124 T .C . 176, 182 (2000) . ) ; Where the underlying tax liability is properly at issue, the - 14 - iCourt, :reviews any determination regarding the underlying ta x liability de novo . Sego v . Commissioner , supra at 610 . if i,,-P.etitioners' primary argument--that the applicable'. period of „limitations expired before respondent's assessment--constitutes a cYallenge to petitioners' underlying .tax liability . See Boyd v . Commissioner , 117 T .C . .127,1 130 (2001) . . Respondent concedes that ,petitioners did not have a prior opportunity to dispute whethe r I ,i the assessment following the completion of the Greenwich litigation was timely, and he does not question our jurisdictio n to consider the issue . . Accordingly, we review respondent' s determination regarding the period of limitations de novo . B . Burden of Proof .v I~ ;'~, ;n Amesbury Apartments, Ltd . v . Commissioner , 95 T .C . 227, ,;24'0-;241 (1990), we addressed as follows the taxpayer's argument 7jthat ;,the section 6229(a) assessment period had expired : , The expiration of the period of limitation on raising it must specifically plead it and carry the burden of proving its applicability . Rules 39, 142(a) . , ;To establish this defense, the taxpayer must make a . assessment is an affirmative defense, and the party prima facie case establishing the filing of the partnership return, the expiration of the statutory period, and receipt or mailing .of-the notice after th e Miami Purchasing Service Corp . ii-running of the period . v . Commissioner , 76 T .C . 818, 823 (1981) ; Robinson v . Commissioner ,'57 T .C . 735, 737 (1972) . Where the party :pleading the defense makes such a showing, the burden of going forward with the evidence shifts to respondent who must then introduce evidence to sho w .that the bar of the statute is not applicable . v . Commissioner , 85 T .C . 535, 540 (1985) . Where (cid:127)respondent makes such a"showing, the burden of going ,:forward then shifts back to the party pleading the' ? Adler 11 1i - 15 - affirmative defense to show that he alleged exception to the expiration of the period i invalid or otherwise inapplicable . The burden of proof, i .e ., the bu persuasion, however, never shifts pleads the bar of the statute of Commissioner , supra at 540 . den of ultimate from the party who imitations . Adler .v . Commissioner , supra at 540 . Adler v . Accordingly, if petitioners presenta prima facie case that respondent failed to timely assess tax and interest under sectio n 6229, the burden of production shifts o .respondent to show that the period of limitations had not expi ed before the assessments . The burden of proof,,however, remains frith petitioners at all, times .17 See Rule 142 (a ) C . Period of Limitations for Making Assessment s Under the TEFRA partnership provisions, the income tax ' treatment of partnership items ordinar ily is determined through a proceeding conducted at the partnershi level . Sec . 6221 . Section 6231(a)(3) defines .a partnersh ip item as any item to be taken into account for the partnership ' s taxable year to the ' l ' "Petitioners filed a motion . to shift the burden of proof) under sec . 7491(a) . Sec . 7491 shifts the burden of proof to th e Secretary if the taxpayer introduces credible evidence with! respect to any factual issue relevant to ascertaining the liability of the taxpayer . However, sec . 7491 applies only, court proceedings arising in connecti n with examination s commencing after the date of its enac ment, July 22, 1998 . Internal Revenue Service Restructuring and Reform Act of 19 :98{ (RRA 1998), Pub . L . 105-206, sec . 300 11 the examination of Greenwich and its partners commenced well before the enactment of sec . 7491, an because the . computational adjustments to petitioners' 1982, 1983, and 1984 returns were made in accordance with the result of,the Greenwich examination , sec . 7491(a) is inapplicable . :Consequently, we denied petitioners' . motion . 2 .Stat . 726 . Because 1 - 16 - lextent regulations provide that the item is more appropriatel y 'determined at the partnership level than at the partner level .18 I The . regulations contain an extensive :list of matters that fal l 'within the definition of partnership item . See sec . 301 .6231(a) (3) -l, Proced . & Admin . Regs . !~ .,,To commence a partnership - level'proceeding , the Commissione r !'must issue an NEAP to the TMP19 and to all other partners entitled to notice under section 6223 . iE See supra note 4 . At th e conclusion of the partnership - level examination , the Commissione r ,must send the TMP and all notice partners an FPAA detailing any . ,'adjustments made to the Form 1065 , U .S . Return-of Partnershi p Income . Sec . 6223 ( a)(2) .. Within 90 days of the date the FPAA i s mailed to the TMP , the TMP may contest the FPAA by filing a etition in the . Tax Court , the .Distri ;~ct Court for the district i n which ;, the partnership's principal place of business is located , i; or the Court of Federal Claims . Sec . 6226 (a) . The court i n which jurisdiction i s established has, jurisdiction to review al l partnership items for r eF the partnership year to which the"FPA A i, 18A nonpartnership item is . defined as an item whichfis not a partnership item . Sec . 6231(a)(4) . Administrative and'~judicial proceedings regarding nonpartnershipitems are not conducted at th e t partnership level . See secs . 6221, 6230(a) . r; , . . I 1,,9Under TEFRA a partnership must have a TMP who is either appointed by the partnership or determined in accordance with statutory and regulatory requirements . Sec . 6231 ( a)(7) 17 - relates and to review the allocation o such items among the partners .. Sec . . 6226 (f.) The Commissioner is prohibited from assessing a deficiency attributable to the adjustment of a pa tnership item until th e partnership-level proceeding is-completed . Sec . 6225 . If the TMP does not file .a petition in the Ta k Court, the Commissioner cannot assess any deficiency attributa le to the adjustment ; of a partnership item until 150 days after . the mailing of the FPAA~t o the TMP . Sec . 6225(a)(1) . If the TMP files a petition in th e Tax Court-within the 150-day period, the Commissioner i s prohibited from assessing any deficiency attributable to partnership item adjustments until the decision of the Tax Court becomes final . Sec . .-6225 (a) (2) 2 0 Section 6229(a) sets forth the period within which the, G Commissioner may assess any deficient that is attributable to the adjustment of a partnership item . It provides that the period for assessment shall not expire sooner than 3 years after (1) the date the partnership . tax retu n was filed or (2) the du e date of the partnership tax return (determined without regar d t o .extensions ), whichever is later . See also Rhone-Poulenc Surfactants and Specialties, L .P . V . c ommissioner, 114 T .C . 5'33, 542 (2000) . Under section 6229(d) the 3-year period described i n 20The finality of a Tax Court dec sion is determined under sec . 7481 . - 18 - section 6229(a) is suspended for the,90-day period during whic h anaction may be brought under section'6226 . Additionally, if a petition is filed challenging the FPAA .under section 6226, the period within which an assessment . may be made is suspended until th ;decision . of the court becomes finial ; .plus 1 year . Sec . 6229(a) . The period for assessment mentioned above continues to apply .aslong as an item remains a partnership item . See sec ., 6229(f)(1) . Section 6231(b), however, lists several ways in which a .partnership item may be converted into a nonpartnershi p item during a partnership-level proceeding .. Most relevant to this ;case,, a . partnership item converts into a nonpartnership item as .of the date the Secretary or the Attorney General (or his delegate) "enters into a settlement ; agreement with the partne r t with', respect to .such items" . Sec . 62431 (b) (1) (C) . If a partnership item converts into a nonpartnership item under section 6231(b)(1)(C), .section 6229(f) provides that the period for, .assessing tax with respect to the,econverted item expires no !sooner than 1 year after the date the item becomes a nonpartnership item . zi Respondent contends that petitioners did not execute a .Iisettlement agreement under section 6231(b)(1)(C) and tha t i, :21The period under-sec . 6229(f) can be extended by agreement . Sec . 6229(f)(1) . - 19 - petitioners remained a party to the-Gr enwich l'itigation-under' section 6226(c) until the Tax Court re dered its final decision . Thus, respondent argues, he was prohib ted by section 6225(a)(2 ) from assessing petitioners" tax'liabil ity until the date th e Court's order and decision became fina L . Respondent contends that he timely assessed petitioners' t x liability within the ;" period allowed by section 6229(a) and " (d) after the Court's l decision became-'final . Petitioners assert-that the rele v ant partnership item s converted to nonpartnership items unde r section 6231 (b) . (1) (C) !I by means of a settlement agreement betwe e respondent . Petitioners argue that M settlement agreement with respondent on or about September 301, 1991 . .,; .through correspondence exchange between Mr . Lerner, .. Greenwich's counsel, and respondent . Alternatively, petitioner s I argue that Mr . Mathia and respondent ntered into a settlernen t agreement when respondent's attorney signed the Greenwic h stipulation on August 30, 2001 . A finding that respondent 'I reached a section 6231(b)(1)(C) settl ment agreement with Mr .s Mathia in either . circumstance would t igger the application of the provision contained in section 6229(f) and make respondent's assessments untimely . Accordingly, we must determine what , constitutes a settlement agreement 'fo purposes of section] f 1 2 0 623 1(b)(1)(C), and we must then decide whether Mr . Mathia and II respondent entered into such an agreement . 6 -D . , Settlement Agreements Under Section 6231(b) (1)'(C) controversy before this Court may be settled by agreemen t between the parties . Dorchester Indus . Inc . v . Commissioner , 10 8 'RT .C .,; ; .320,, 329 (1997), affd . without published opinion 208 F .3 d 205 (3d Cir . 2000) . The term "settlement agreement", however, is ,~ II not defined in the Internal Revenue Code, and section 6231(b)(1)(C) does not provide any detail as to what constitutes a settlement agreement for purposes of converting a partnership itiem into a nonpartnership item . Because a settlement is a 'contract, however, courts generally apply principles of,l',,contract 'law,-,.to determine whether a settlement, has been reached . Se e Dorchester Indus . Inc . v . Commissione r , supra at 330 ; Robbins l Tire-I& Rubber Co . .v . Commissioner , 52 T .C . 420, 435-436', supplemented by 53 T .C . 275 (1969) . A settlement agreement can be reached through offer an d acceptance made by letter, or even in the absence of a writing . -' Dorchester Indus . Inc . v . Commissioner , supra at 330 . Settlemen t issue before the Court does not .,require the execution of a clos .ing agreement under section 7121, or ..any other particular Emethod or form . Id . Settlement agreements are effective and binding .once there has been an offer and an acceptance .; filin g it - 21 - the agreement with the Court as a stipµlation is not required fo r the agreement to be effective and bind ILng . Id . 'at 338 . Under TEFRA, a settlement agreem e it entered into by the T M P will generally bind a nonnotice partne r if the settlemen t agreement states that the agreement'i s binding on the nonnotice partner . Sec . 6224 (c) (3) (A) If a pa rtner wants to ensure that a settlement agreement entered into by the TMP will not be binding on him, the partner can file a statement with the Secretary providing that the TMP does not have the authority to enter into a settlement agreement on that partner's behalf Sec . 6224 (c) (3) (B) . As we discussed above, petitioners argue that Mr . Mathias entered into a section 6231 (b) (1) (C) ettlement agreement with respondent on two separate occasions . We shall examine the! evidence and circumstances surroundin each occasion to decide whether Mr . Mathia entered into a secion 6231(b)(1)(C) settlement agreement with respondent as petitioners contend . 1 . Correspondence Between Partie s Petitioners argue that Mr . Mathia entered into a sectio n 6231(b)(1)(C) settlement agreemen t 1991 . According to petitioners, res p settle in September 1991, which Mr . . If accepted on or about September 30, Petitioners rely . upon a series of letters from Mr . Lerner to all of the partners - 22 - JIin the Swanton-Partnerships as proof that the settlement agreement existed : (1) A September 19, 1991, .letter,advising all partners i n I! ~' I E the Swanton Partnerships to "accept the Government's . settlemen t of,ferfpwhich was communicated to us this week',, ; (2) a November 8, 1991 ., letter indicating that the offer communicated in the September 19, 1991, letter had been accepte d by-19 of the 20 Swanton TEFRA-partnerships (including Greenwich) . The letter stated that the cases had been settled, and that onl y th preparation of decision .documents'Eand closing agreement s memorializing the terms of the settlement remained outstanding ; ~(3) a January 10, 1992, letter'from Mr . Lerner to responden t inquiring about respondent's progress~in implementing' .the settlement ; and March 13, ,1992, .letter referencing the settlement- tha t occurred in 1991 and. informing the partners that the settlemen t I was ;being finalized . As further proof that Mr . Mathia and respondent entered int o ,a settlement agreement in September 1991, petitioners rely on a serie s. of letters from' respondent : (1) A,letter dated January ,14, 1992, in which respondent's ifatto°rney informed Mr . Lerner that heswas appointing an attorney to effect the settlement of the Swanton TEFRA Partnerships ;, . 23 - (2) a .letter dated in October 19 9 2 that was received by 4 Zapruder & Odell'on October 26, 1992, in which-respondent's ' attorney stated that "we agreed to ent r into the settlement agreement" on the basis that the TMP f or each partnership was settling the case on behalf of all, pa r ners ; (3) a letter dated April 9, 199 .3, in which respondent' s attorney listed the "terms on which we agreed on September 30 L 1991" ; - (4) a letter dated June 11, 1993, that discussed "terms o f settlement" and other "computational issues" affecting the . .. settlement process ; an d (5) a letter dated September 3, ,993,- again discussing the "termsof the settlement" and other 'v rious issues pertaining ; to the settlement . Although the above-described correspondence confirms that Greenwich and respondent reached an a reement in 1991 to enter into a settlement of the partnership-level proceeding, .we remain unconvinced that the agreement was su ficiently fleshed out in 1991 to constitute a binding settleme t agreement at that time . The agreement in principle that was r ached in 1991 set forth th e parameters of a settlement, but the correspondence described above reflects that negotiations cont'nued between respondent and the attorney representing the Swanton TEFRA partnerships to a t .1 i least September 3, 1993 . Moreover, the correspondence indicates - 24 - that,.the execution of a decision document resolving th e (partnership litigation depended upon the fulfillment of, certain condi ;tions such as~the TMP's ability to represent that all partners consented to the settlement .22 Implementing an d finalizing the proposed settlement're~quired the' collection and It 11 analysis of detailed information, the preparation of calculation s and~agreements , . and in some cases, the execution of. closin g agreements by individual partners . Even if we assume , however, that' respondent and th e Greenwich TMP entered into a binding settlement agreement to resolve the partnership litigation in 1991 1, we would stil l conclude that agreement'did not qualify as a settlement agreement 11 between a partner and the Secretary,iwithin the meaning of sectio n 6231'(b,') (1) (C) . The basis for our conclusion is set forth below . ,I ,,Section 6231(b)(1)(C) refers only to settlement agreements '!reached between the Secretary or the Attorney General (or hi s delegate) and a partner . Section 623 1 (b) (1) (C) does not contai n 11 any reference to an agreement betweenlthe Secretary and a TMP with,'respect to a . partnership-level proceeding . The wording o f '22Among other things, the settlement of the partnership - 'levelproceeding was conditioned upon the TMP's executing a stipulation consenting to the entry of decision under Rule 248(a ) ., which, when filed with . the Court, would be binding on all parties, including individual partners . Under Rule 248a), the TMP'ls~!signature on the stipulation "constitutes a certificate by +the tax matters partner that no party objects to entry of decision . " lh - .25 - section 6231(b)(1)(C) presents us with the real issue at hand .~~ does a settlement agreement between th Secretary and a TMP ' resolving a partnership-level proceedi g~under sections 6221-6231 constitute a settlement agreement with a partner with respect to the partnership items of the partner under section 6231(b)(1)(C) ? In Crnkovich v . United,States , 41 Fed .. Cl . 168 (1998),'.affd . per curiam 202 F .3d 1325 (Fed . Cir . 2000), which also involve d Swanton TEFRA-partnerships, the U .S . C urt ;'of Federal Claim s examined two agreements reached in two separate actions .23 I n the first action, the court held that he taxpayer-partner s entered into a section 6231(b)(1)(C) settlement agreement when they executed a Form 906, Closing Agreement-on Final Determination Covering Specific Matters . Id . 'at 175 . In thel second action, the .court held that a stipulation of settlement entered into between individual taxpayer-partners and the Commissioner constituted a settlement agreement under section 6231(b)(1)(C) . Id . at 178 .- In reaching both conclusions,H ;'the court focused on the intent of the parties to enter into a binding, conclusive agreement governing the settlement of disputed partnership items . Id .-'at 1 3, 179 . The court allso' examined the role that a section 6231(b)(1)(C) settlemen t 23 Two of a total of five consolidated actions were before . Crnkovich v; the court on cross-motions for summar4 judgment . United States , 41 Fed . - C1 . 168, 169 F .3d 1325 (Fed . Cir . 2000) . 998), affd . per curiam,202 if - 2 6 agreement is intended to serve under the TEFRA partnership provisions : At the time the IRS entered the Form 906 agreement?, i t faced competing incentives in determining how best't o „handle the partnership tax issues presented for the * * * [taxpayers'] post-1982 tax years . On the one ,hand, as reflected by the TEFRApartnership provisions , it ordinarily is efficient for the . IRS to make the determination as to the tax treatment of partnership items at the partnership level . On the other hand,1 because the IRS was in the process of negotiating wit h the * * * [taxpayers] on an individual partner leve l with respect to pre-TEFRA tax years, there wer e potential efficiencies in also dealing with the * * * ,[taxpayers .] individually with respect to post-TEFRA tax years . In the Form 906 agreement, the IRS resolved these competing incentives by deciding to deal with the * * * [taxpayers] individually and apart from any partnership-level determinations ' . For certain tax,, issues, the bilateral agreement establishes the terms that control the * * * [taxpayers'] personal tax !l, liability without providing an exception in the even t of a contrary resolution of the same tax' issues, ,at th e ,partnership level . Hence, in entering the Form 90 6 agreement, the IRS chose to forego the advantages o f -making its determinations at the partnership level and opted instead to deal with the * * * [taxpayers] individually with respect to the tax issues addresse d l the Form 906 agreement . Entering into a "settlement agreement" under I .R .C . § : 6231(b ) (1)(C) is a statutory !1amethod of exercising such a choice . [ Id . at 174-175 ; emphasis added . ] The court's analysis in Crnkovich illustrates an important distinction between a settlement agreement reached at the II' partnership level by a partnership's TMP and a settlemen t agreement reached directly with an individual partner . 'When a ;partner enters into a settlement agreement individually, as each '!taxpayer did in Crnkovich v . United States , supra , he remove s Jthims'elf from the partnership proceeding and allows the - 27 - Commissioner to resolve his tax '}liabil ty on an individual basis . In such a case the disputed partnershi : items are no longer .imor e appropriately determined at the partnership level, and secti"ori 6231 (b) (1) (C) operates to convert the artner' s partne'rship'iiems to nonpartnership items . This congers on allows the Commissione r to proceed with assessment and collecdon against the individua l partner under section 6229(f)~in accor,ance with the terms of the settlement, free of the TEFRA-imposed -estrictions' on assessment mentioned above . See sec . 6225 . The 1991 agreement reached by respondent and Mr . Lerner o n behalf of the Swanton .TEFRA partnerships outlined in principl e the terms that would govern a settleme t of the partnership' litigation involving 19,of 20 Swanton EFRA partnerships . It did not'refiect an .agreement to settle any individual partner's liability resulting from adjustments to partnership items outsid e of the partnership-level proceeding . .I Consequently, the agreemen t did not operate to remove Mr . Mathia or any other partner from the partnership-level proceeding . Instead, the agreement starte d a process that culminated with the filing of the Greenwic h stipulation and the Court's entry of decision . . After th e decision resolving the partnership litigation became final , respondent adjusted petitioners' tax iability in-accordance with the decision resolving- the 'partnershi litigation' as requir'edl and permitted by sections 6221-6231 .., - 2 8 - We conclude on the record before us that. the agreement reached between respondent and Mr . Lerner was an agreemen t rela' .ting to theTEFRA partnership probeeding on behalf of th e Swanton TEFRA partnerships (including Greenwich) ,and was not an lagreement between respondent and Mr . Mathia that operated t o convIi'rt Mr . .Mathia's partnership items into nonpartnership items las contemplated by, section 6231 (b) (1) (C) . . 2 . Greenwich Stipulation , Petitioners also argue that Mr .I .Mathia,,entered into a !section 6231(b)(1)(C) settlement agreement on August 30, 2001, when',respondent countersigned . the Greenwich stipulation : Reppondent .disagrees, arguing that the Greenwich stipulation is not a-..-settlement agreement of the type described in section 6231I,(h)(1)(C) . According to respondent, the Greenwich stipulation offered by petitioners does not use the phrase "terms f f'settlement", addresses issues solely at the partnership level, !i t~ sand functions only to settle the partnership-level proceeding'. 'I agree with respondent . As with the .1991 agreement the adjustments to partnership items in the Greenwich stipulation w ere .' adjustments to be made at the partnership level . Under Rule i 248(a),,', Mr . Smith agreed to the adjustments to the dispute d , II partnership items on behalf of Greenwich partners (including Mr . Mathia~) who did not enter individual closing agreementsa The adjustments agreed upon were made to!;items reported on . - 29 - Greenwich's partnership return, and the stipulation made no reference to the individual liability of Greenwich partners . Thus, while the stipulation was executed by Mr . Smith in hi s capacity as the TMP who possessed the necessary authority to bin d Mr . Mathia and/or his .estate,,the .stip ration reflected an , ' [ agreement regarding the treatment of p rtnership items that wa s reached by and with the partnership . jrhe stipulation did notj_ qualify as "a' settlement agreement with the'partner" with respect to partnership items within the meaning of section 6231(b)(1)i(C) A settlement agreement under section 6 31(b)(1)(C) operates, to convert a partner's distributive share of partnership items to nonpartnership items and enables the Commissioner to assess that partner's deficiency without regard to the restriction on . assessment set forth in,section 6225(a)(2) . Respondent was prohibited by section 6225(a)(2) from assessing deficiencies attributable to the Greenwich partner hip items until this court had entered a decision in the partner hip proceeding and that, decision had become final under section 7481 . We conclude that neither Mr . Mat is nor his estate entered into a settlement agreement with respondent that qualified ;as a settlement agreement with a partner within the meaning of section 6231(b)(1)(C) . Accordingly, the disp ted partnership items wer e not converted to nonpartnership items, land-the period fo r assessment under section 6229(d) . .remai~ned open for the 11 - 3 0 .assessments at issue here . Under section 6225 ( a)(2), respondent was restricted from assessing deficiencies attributable, to th e jpartnership item adjustments set forth in the Greenwich! ~stipulation until April 17, 2002, the .day the Court's decision belcame final .24 Under section 6229(d), respondent's January 27, II 12003,,~ .kjassessment is timely because it occurred within l ;1,year of theidecision's becoming final . We_hold, therefore, tha t (cid:127)il~respondent is not barred by section 6229(f)(1) from assessing and ,collecting petitioners',unpaid tax liability . Abatement of Interes t Section 6601(a) provides., in general, that if any amount o f tax imposed by the Code is not paid on or before the last dat e ,[ prescribed-for payment, interest on such amount must be . paid for theperiod from such last date to the ; date paid at th e ,underpayment rate established under section 6621 . Section I6611;(a) similarly provides that interest must be allowed and paid on,aiy overpayment in respect of any internal revenue tax at the overpayment rate established under section 6621 . Section 6621(d ) :provides for the elimination of interest on overlapping-period s 24Under sec . 7481 decisions of the Court shall become final upomthe expiration of the time allowed for filing a notice of appeal if no such notice has been duly filed within such time . Under sec . 7483 a taxpayer has 90 days to file a notice of appeal pafter'the decision of the Court is entered . ° I 31 - of tax overpayments and underpayments . 25 To the extent that,far any period interest is payable and all wable on equivalent underpayments and overpayments by the ame taxpayer, the net rate of interest under section 6621 on such amounts is zero for such period . Sec . 6621(d ) Section 6404(e), as it applies to this case,26 provides, in pertinent part' : SEC . 6404(e) . Assessments of Interest Attributable to .Errors and Delays by Internal Revenue Service .-- (1) In general .--In the case of any assessment of interest on-- (A) any deficiency, attributable in whole or in part to any error or delay by a n officer or employee of Service (acting in his performing a ministers the Internal Revenue official capacity) in 1 ac t the Secretary may abate the assessment of all orany part of such interest for any period . 25However, sec . 6621(d) generally is effective with respect to interest for periods beginning after July 22, :1998 . RRA,1998 sec . 3301, 112 Stat . 741 . 26In 1996 Congress amended sec . 6 04(e)(1) to permit abatement of-interest for unreasonabl error or delay in performing a ministerial or managerial act . Taxpayer Bill o f ,Rights 2, Pub . L . . 104-168, sec . 301, 10 Stat . 1457 (1996) .' The amendments to sec . 6404(e)(1), howeve , apply only to interest accruing with respect to deficiencies or payments for tax yeIrs beginning after July 30, 1996 . do not apply in this case . Accordingly, the amendments Id . .A ministerial act .is a procedural or mechanical act that does no t involve the exercise of judgment or discretion and that occurs . -, 32 - 11 Jthe processing of a taxpayer's case after al l prerequisites to the act, such as conferences and reviews by supervisors, have taken place . Sec . 301 .6404-2T(b)(1), Temporary Proced . & Admin . Regs .,52 Fed . Reg . 30163 (Aug . 13, 19,87) .27 A decision concerning the proper application of Federal tax law is not a ministerial act . Id . The Secretary will not grant a n !abatement of interest if a significant aspect of the delay is attributable to the taxpayer . Sec . .6404(e)(1) . When Congress enacted section 6404(e), it did not intend th e 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 . LRept . 99-313, at 208 (1986), 1986-3 .C .B . (Vol . 3) 1, 208 . Under section 6404(h)(1), we have jurisdiction to determine whether the (Commissioner abused his discretion in denying a taxpayer's .request for abatement of interest . Because the Commissioner's abat'ement authority involves the exercise . of discretion, however, [we must give due deference to the Commissioner's determination . g27Because the taxes in question are for years before 1996, the temporary regulations (rather than the final ones) are applicable, though the same in substance insofar as relevant' here . - 33 - Woodral v . Commissioner , 112 T .C . 19, 3 (1.999) ; Mailman v, Commissioner , 91 T .C .(cid:127)1079, 1082 .(1988 . In order to prevail, a taxpayer must prove that the Commissio er abused his discretion by exercising it arbitrarily, capricio sly, 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) . Petitioners contend that they are entitled to an abatemen t of interest for three periods beginning on December 27 ., 1984, E when petitioners allege respondent iss ued the first Greenwich ) NEAP, to August 25, 2003 .28 Our analy~is of each period is se t forth below . A . Period From December 27, 198 , to August 3, 199 0 . Petitioners assert that'respondeit issued NBAP's wit h respect to Greenwich's 1983 and 1984 t1ax years which Greenwic h received on December 27, 1984, and Ma ch 16, 1987, respective ly , and that respondent took an unreasona le amount of time by-no t providing a further response until August 3, 1990, when respondent issued to Greenwich the FP for tax years 1982, 1983 , and 1984 . Petitioners . allege that t h interest that accrue d during this period was attributable t delays resulting 28 Petitioners erroneously contend the date respondent issued the notice Greenwich . that Aug . 25, 2003, was of intention to levy to 34,- 1 ~ from . the uncoordinated involvement of multiple IRS districts and Ithat ;;the lack of coordination was a ministerial act . Ili 4k:Petitioners' argument is not supported by the record . In 1 Beagles v . Commissioner , . T .C . Memo . 2003-67, a case also, involving the tax-liability of a partner in a Swanton partnership, we set forth some of the history behind the Swanton partnership litigation, and we held that the Commissioner was not ,erroneous or dilatory in performing a ministerial act between April,,15, 1984,rand May .8, 1992 . During this period th e Department,of Justice conducted a criminal investigation o f Norman Swanton,(Mr . Swanton), the individual behind the formation ill and promotion of the Swanton coal programs . Id . During the, !,investigation civil proceedings were suspended in accordance wit h established . IRS ,policy ." After the . ;rperiod of limitations for prosecution'expired, the criminal investigation, of Mr . Swanto n (terminated . .In,1988 litigation involving the pre-TEFRA'Swanton ,partnerships commenced in,this Court .11 That litigation continue d 11 until approximately September 1993 .30 Id . During the pendency II 29 The delay of a civil matter until the resolution of a 1reiated c-riminaL matter . is a . 1-o-ngsta'n-ing policy of the IRS . - 7aylor :v . Commissioner , 113 T .C . 206, 212 (1999) .(citing FBadaracco v . Commissioner , 693 F .2d 298, 302 (3d Cir . 1982), I'revg'.'T .C . Memo . 1981-404, affd . 464 U .S . 386 (1984)), affd . 9 Fed . Appx . 700 (9th Cir . 2001), . 30Several test cases were tried in 1992, and an opinion was jfiledi,Iin 1993 in Kelley v . Commissioner , T .C . Memo . 1993-495 j~(taxpayers not entitled to deductions' .claimed in relation t o (continued . . . ) i1 35 - of the pre=TEFRA partnership litigatio $i, respondent made- a managerial decision to suspend proceed jings involving the Swanto n TEFRA partnerships . The mere passage of time during t e litigation phase of a dispute does not establish an error or delay by the Commissioner in performing a ministerial act becaus decisions about how t o proceed in the litigation phase of a c ase necessarily involve ; discretion . Lee v . Commissioner , 113 T .C . 145, 150-151 (1999)-. In the context of the Swanton partners hip litigation, we haven ' uniformly held that decisions made by the IRS regarding th e management of the Swanton project were not ministerial acts . See, e .g ., Jaffe v . Commissioner , T .C . Memo . 2004-122, affd .,175 Fed . Appx . 853 (9th Cir . 2006) ; Dadia v . Commissioner, T .C . Memo . .2004-121 ; Deverna'v . Commissioner , T .C . Memo . 2004-.80 ; Beagles v . Commissioner , supra . 30( . .continued ) Swanton coal programs) . As we stated T .C . Memo . 2003-67 : in Beagles v . Commissioner , The Court's practice of selectin test cases and holding other .cases_in .abeyance_ ending the res_alution of the test cases was among the management tools adopted to deal with the large number of cases . It was not feasible to litigate simultaepusly hundreds of cases involving substantially similar issues . Here, respondent's counsel turned .to the group of TEFRA cases, including petitioner's partnership, as soon as the trial of the Swanton test cakes concluded in 1992 . Prior to that time, the delays a e explained by the complexities and burdens of mana ~ling the cases . . 36 - ; ;,,,, .Respondent's decisions and actions during this period were managerial and . involved the exercise of . discretion-. Weiconclude that respondent did not abuse his discretion by denying . peltitioners' .request for abatement of interest for the perio d fromDecember 27, 1984,, to August 3, 1990 . . November 8, 1991, to August 30, 200 1 1E , .During, this period, petitioners claim, respondent wa s ]dilatory,in processing the closing agreements and Rule 248(a) decision document necessary to consummate a, settlement of th e . Greenwich,; partnership litigation . after the parties reached an n !lagreementin principle in or aroundNovember 1991 . Petitioner s argue';:!that respondent took an unreasonable amount of time (nearl y 1I4 years) to issue the decision document to Greenwich onjJuly,'3 , 11995,,, ;.,and an even . more unreasonable amount of time (nearly 5 : Ili 1 years)^ .to countersign the decision document on August .30, 2001 , after .Mr . Lerner had executed it on behalf of the partnership and returned it to respondent in September 1996 . Petitioners-argue that the processing of these documents was a ministerial act and 1[that"respondent's delay in finalizing the Greenwich settlemen t (entitles petitioners to an abatement of interest that accrued ,(,during this period . . The record with which we are presented confirms that the 1991 : agreement presented a challenge that involved the collection III of information and the preparation of documents for 19 Swanton it ;~,, - 37 - TEFRA partnerships and, each of the pa r ners . Nevertheless, w e must examine the -record for evidence p rtainfng to the manner in which respondent implemented and finalized the Greenwich settlement . The notice of determination denyi g(cid:127)petitioners, abatemen t request contains no explanation of what transpired fro m November 8, 1991, to August 30,,2001 . It simply states that respondent did not find any errors or delays that merit the' abatement of interest . Consequently wp review the recor d .stipulated by the parties for what it ells us about the Greenwich settlement process from Nove ber 8, 1991 ; to August ,30 , 2001 . The record reveals the following . . .In approximatel y September 1991 respondent's attorney and Greenwich's- attorne y reached an agreement in principle to, s ettle the'TEFRA partnership litigation pending in this Court . On July 3, 1995, respondent' s attorney mailed to Greenwich's counsel the decision document and the closing agreements for execution by counsel, Greenwich's MP, and the partners named in the closing agreements . On September 25, 1996, Greenwich deliver d the decision document ! signed by the TMP and Greenwich's counsel to respondent . OnJul y 17 and November 7, 1996, closing'agreements-were mailed t o I respondent's counsel, Ms . Sullivan . On February :27, 2001, Sullivan sent another decision docume t to Greenwich 's counsel - 38 - and requested that it be executed .,,Pn August 30, 2001, h ' C representative of respondent countersigned the decision document land submitted it to this Court . The stipulated record reveals the following gaps in th e processing of the Greenwich paperwork : (1) An-approximately 4- ,year„gap between the 1991 agreement and July 3, 1995, when the ,decision document and the closing agreements were'mailed t o Greenwich ; (2) an approximately 1-year gap between July .3, 1995, and November 7, 1996, the last date that the stipulated recor d i( s shows closing agreements were mailed to respondent's counsel, and (3) an approximately 5-year gap between November .8, 1996, and ,August 30, 2001, when the decision document was countersigned by 1respondent . We examine each of the gaps to decide whether respondent abused his discretion regarding the abatement of Ninte .re,s't . In .making the examination, , we assume that the (stipulated record includes the administrative file thatitwa s .available to respondent when he made his decision not to abate interest . With respect to the first gap,-the stipulated record establishes that after the 1991 agreement was reached, th e parties to the Greenwich partnership litigation gathered and exchanged information necessary-to identify the Greenwich partners who were required to execute±closing agreements, and 'respondent prepared necessary computations as well as the 39 - Greenwich decision' document and closin , agreements . That process was complicated and took time . -Althou h the approximately ;; -year gap was substantial, we see nothing in the stipulated record tha t supports a conclusion that the first gap-was the result of' : unreasonable delay by respondent in pe ; forming 'a ministerial' act . Rather, the stipulated record reflects that' the process of 'PP' implementing the settlements . of the Sw nton TEFRA partnerships was a managerial nightmare requiring cooperation over an extende d period to prepare necessary calculations and paperwork and' t I ensure that the TMPs could satisfy : respondent' s'requirement'GI'tha t they certify no partner objected to(cid:127)th partnership . actions . Petitioners' com in a concern about the management of the section 6404(e) as then in effect doe s interest for" managerial decisions .- With respect to . the second gap , indicates that respondent mailed the . ecision document and the closing agreements to .Greenwich, an d reenwich took . approximatel y 1 year to return'the .executed decision' document and the closing record that supports a conclusion that the second gap was the result of any unreasonable delay by respondent in'performing a ing in the-stipulated ministerial act . 40 - he third ._gap .of approximately 5 years requires a!1differen t 1conclusion, however . The stipulated,;~record is substantial an d 4includes paperwork . generated by respondent as well as $ ; correspondence between respondent and Greenwich . The stipulate d record reflects that Greenwich delivered an executed decision do~cument to respondent's counsel on September 25, 1996,, and tha t Greenwich also mailed signed closing l:agreements to respondent on July 17 and November 7, 1996 . Although the stipulated .record does not clearly reflect that all of the Greenwich closing !agreements were included in, the two mailings , there is no correspondence in the administrative record to suggest that any f the required closing agreements were missing or tha t (Greenwich's TMP and attorneys ; were dilatory in any way . jconse ;quently, we infer from the documents that no later ;j than, Noyember 1996 Greenwich had returned "the necessary documents, to respondent's counsel and that the only steps necessary t o 1consummate the Greenwich settlement,were the ministerial acts of ~11.countersigning the decision document and the closing agreements land filing the decision document with the Court . The stipulated record, however, ; contains no credibl e explanation of the 5-year gap between the delivery of closing agreements on November 7, 1996, and the, countersigning on August 1130 ; 2001, of the decision document, which was filed with th e II''Court as a stipulation of settlement on August 31, 2001 . - 41 - addition, the stipulated record reflects that on February 27, 2001, respondent's counsel sent a seco d decision document to Greenwich's counsel that was identical to the first decision document executed by Greenwich in 1996, a development that suggests that respondent may have lost the original executed- decision document . .In Jacobs v . Commissioner , T .C . Memo . 2000-123, we addressed . i l a situation where the basis for the Commissioner's, determination not to abate interest had not been clearly explained either in the final determination or at trial . We noted that an agency must cogently explain why it has exercised its discretion in a given manner, see Motor Vehicle Manufacturers Association of the United States v . State Farm Mut . Auto .l Ins . Co . , 463 U .S . 29, 48- 49(1983), and that an agency's exercise of discretion that is not adequately explained is an abuse of discretion because ;it!is without rational explanation, see Estate of Gardner v . Commissioner ,, 82 T .C . 989, 1000 (1984) In Jacobs v . The Commissioner is in the best position to know, what actions were taken by IRS officers and employees during the period for which peti_ ioners' abatemen t .request'was made and during any ubsequent inquiry based upon that .request . If we were to uphold the Commissioner ' s determination not to abate interest where the Commissioner has not clearly explained the basis for the exercise of that dscretion, we would be condoning a review framework that would . encourage the ; Commissioner to provide as little information as possible about the handling of c ses . during , theperiod 42 - ,of the abatement request and about the inquiry i n i response to the request . We have a similar dilemma in this case . The notice of determination contains no explanation of how respondent, exercised his discretion and does not recite any facts . in support of the jexercise of that discretion . Although the stipulated record provides many of the relevant facts, it fails to provide critica l k'liniformation that only respondent would have . For example, the a~stipulated record does not establish the date when all of th e closing agreements were received by respondent's attorneys or ''indicate what respondent did with the closing agreements he r received in 1996 . The only credible' evidence in the relcord31 regarding respondent's receipt of closing agreements establishe s that closing agreements were sent to respondent in July,, an d November 1996 . In the absence of contrary evidence, we infer ,that respondent had the closing agreements no later than November 1:1 l996 .. The stipulated record does not explain the delay"on the part of respondent in countersigning and filing the Greenwich indecision document . . , .,31Although the notices of determination issued under secs . 6320 and 6330 contain a conclusory statement to the effect that the delay was attributable to Greenwich , we conclude that the 1stat'ement is not credible because there is nothing in .the stipulated record other than this statement to support a finding that any part of the delay was attributable to Greenwich . In fact the credible evidence in the re 'c°ord is to the contrary . Greenwich requested prompt processing of the proposed settlement and promptly returned the executed decision document and the closing agreements . - 43 - In Dadian v . Commissioner , T .C . Memo . 2004-121, . also a Swanton TEFRA partnership case, we fou dthat the Commissione r 's . task of countersigning the closing agreement was a ministeria l act and : that because the Commissioner ;ook an unreasonable amoun t of time to countersign, the taxpayer w s entitled to abatemen o f interest. .The present case, like the Dadia case, involved th e ministerial act o f elevant settlement document . Although Mr . Mathia did not execute an individua l ,closing agreement as the taxpayer di d in Dadian , the processing of the Greenwich settlement,as to Mr . athia and other Greenwic h partners depended upon-the execution closing agreements by j limited partners and by respondent, decision document by Greenwich and respondent . The record reflec~ts that respondent prepared and mailed out the relevant decision document and closing,agreeme is in .1995 and received th e signed documents in 1996 . However, t i e Greenwich decision ; . document was not countersigned and filed with this Court until 2001 . The delay in performing this ministerial act is not . explained in th e record . Because the . delay in countersigning the decision document i s not explained by credible evidence in the stipulated record, we conclude that respondent abused his discretion in refusing~to - 44 - abate'!F,interest for the period from November 8, 1996, t o August 30, 2001 . August 30, 2001, to August .25, 200 3 ' ,r-Petitioners argue-that they are entitled to abatement of }Iintere'st accrued from August 30 , 2001, the date the Greenwich tipulation was signed, to August 25,!"2003, the date they .alleg e !,respondent issued the notice of intent to levy .32 Petitioners assert that the issuance of the notice is a ministerial act which ,respondent was dilatory in performing . Respondent could not assess income tax liabilities".0f" individual partners . bound by the decision entered in the Greenwich partnership litigation until the decision became final Zee sec . 6229 . The Court's order and decision in the Greenwich 1litigation became final . on April 17, 2002 . Under section . 6229„(d)'°-('2) , respondent' had 1 year to, assess the tax resulting from' .'adjustments in the Greenwich stipulation . Responden t ,,,':assessed petitioners' liabilities for 1982, 1983, and 1984 on January, 27, 2003, less than 1 year after the decision became fin'a1 .33 . The stipulated record does not reveal any unreasonabl e 3 2We have found that respondent issued the notice of intent u. y. to,levy on Feb . 10, 2004 . II 3 3'In several of the Swanton TEFRA partnership cases that we have{~decided, we found that some of the Internal Revenue iService's files were destroyed as a result of the destruction of the World Trade Center on Sept . 11, 2001 . See, e .g ., Dadian v . Commissioner , T .C . Memo . 2004-121 ; Beagles v . Commissioner , T .C . (continued . . .) 45 - or unexplained delay in performing a ministerial act for this"' .' part of the period . For the remaining period ., January 28, 2003,'through February 10, 2004, the stipulated record shows-that respondent I maile d required notices of the assessments to petitioners,(cid:127)conducted~an investigation to, identify levy sources and evaluate whether'a levy was appropriate, issued a notice nd demand for payment'to- petitioners, and .made an administrativ decision to issue a notice ;of intent to levy . -The process ) used" by' the IRS to decid e whether to proceed with collection by evy requires managerial evaluation and the exercise of judgme n and does not consis t solely of ministerial acts . That proc ess was followed in this ' case. Because we cannot identify any unreasonable delay in' performing a ministerial act during t is period, we sustain] respondent's determination as to the ntirety of this period . We conclude that respondent did riot abuse his discretionjb y denying petitioners' request for inte est abatement for the ' period from August 30, .2001, to Augus D . Section 6621(d) Lastly, petitioners request abatement of interest resultin g from application of the "global netting" concept of section , 33'( . . . continued ) Memo .. 2003-67 . The stipulated record, however, does no t establish whether any of the Greenwic1 partnership . litigation files were also destroyed on Sept . 11,, 2001 . . - 46 - ij, 166 12l!(d) . Petitioners assert that the termination of the {Greenwich partnership in 1987 released Mr . Mathia from his shar e of ;dertain partnership debt,-resulting in $234,975 of income i~beingfreported on petitioners' 1987 income tax return . According 1tofpetitioners, this figure represents the amount by which Mr . ,Mathia's cumulative deductions with respect to Greenwich in 1982, 1983,' ;-and 1984 exceeded his cash outlay for . his, interest in Greenwich . Petitioners argue that they should be allowed, for interest abatement purposes . only, to reverse the income,treported in, ;1987, in connection with the disallowance of the relate d ~ide'ductions in .1982, 1983, and 1984 . Petitioners .further allege that,,q„reversal of the 1987 income results in an overpayment of $210.,23,3 for that year and that interest on this overpaymen t h,ould.be allowed . to offset and "zero lout" the interest accruin g on the 1982 ; .19'83 ., . ..and 1984 deficiencies . d '-Petitioners'. argument is without,!'merit for several reasons . IFirst',1-,section 6621(d) generally is effective for interest for jl~ pe beginning after July 22, .1998''.' . Internal Revenue Service Restructuring and Reform Act of 1998, Pub . L . 105-206, sec . 3301, 112 Stat . 741 . Second, although a special rule was enacted that {nitigates .the effective date provision described above fo r periods beginning before July 22, 1998, petitioners do not appear to satisfy its requirements . Id . sec . 3301(c.)(2), 112 Stat . 741, as amended by Omnibus-Consolidated and Emergency Supplemental 47 - . Appropriations Act, 1999, Pub . L . 105 = 277, sec . 4002(d), 11'2" .~ Stat . 2681°906 (1998) . Finally, even if section 6621(d) were to apply to the periods at issue, for the e to be a netting of, overpayment and underpayment interest" nder section 6621(d)!'there must be an overpayment generating-inte est,owed to the taxpayer ., An overpayment begins to .accrue intere t on the date of payment . of the first amount which-is in excess of the tax liability . Sec . 301 .6611-1(b), Proced . & Admin . .R gs . Petitioners never made an overpayment ; with regard to their 1987 tax liability .34 Petitioners' 1987 income tax return re ported a tax . liability of $19,473, and respondent . assessed addi t ional tax of $23,698 .on1: May 3, 1993 . Petitioners paid the ful 1 amount of the ta x assessed, plus accrued interest and'penalties, and petitioners ' 1987 tax account balance is zero . Because there .is no overpayment, there is no overpayment 'nterest payable to petitioners . Respondent properly denied petitioners, claim- f or interest netting . III . Respondent's Collection Actions The only issues raised with resp ct.to respondent's collection actions were the limitati#s issue and the interes t abatement issue . We conclude that th requirements of section s 34According to the 1991 agreement, any partner who reported any debt forgiveness income in 1987 w s entitled to file a claim for refund for the tax paid on that income . Petitioners did~not. file a claim for refund with respect o any 1987 debt forgiveness income . 6320.;and 6330 have been satisfied and that respondent may proceed wiihl:'tcollection except to the extent !set forth in this opinion . IV . Conclusio n y We have considered all the other arguments,'made byj .. petitioners, and, to the extent not discussed above, conclud e 11thos ei44arguments are irrelevant, moot, or without merit . .t' Because we conclude that petitioners are entitled t o interest abatement for the period from November 8, 1996, to and I(' I, ,including August 30, 2001, petitioners' unpaid liability for purposes of sections 6320 and 6330 must be-recalculated to ,reflect our holding . We shall enter a decision authorizing (respondent to . proceed with collection once respondent has abate d !i interest in accordance with this opinion and has so advised the Court and petitioners . o: reflect the foregoing, IL Ani~appropriate decision wil l ii be entered . ii 1 P IE II