TAX COURT OPINION

Case: George E. Sims and Ann L. Canon Sims, Deceased
Docket Number: 3684-16SL
Judge: Leyden
Opinion Type: bench
Filed: 03/21/2017
Pages: 11

UNITED STATES TAX COURT WASHINGTON, DC 20217 GEORGE E. SIMS AND ANN L. CANON SIMS, DECEASED, Petitioners, v. SD ) ) ) ) ) Docket No. 3684-16SL. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) 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 Petitioners and to respondent a copy of the pages of the transcript of the trial in the above case before Special Trial Judge Diana L. Leyden at Houston, Texas, containing her oral findings of fact and opinion rendered at the conclusion of the trial. In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) Diana L. Leyden Special Trial Judge Dated: Washington, D.C. March 21, 2017 SERVED Mar 22 2017 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 2.4 25 Capital Reporting Company Bench Opinion by Special Trial Judge Diana L. Leyden February 15, 2017 George E. Sims & Ann L. Canon Sims, Deceased v. 3 Commissioner Docket No. 3684-16SL I. The Court has decided to render oral findings of fact and opinion in this case, and the following represents the Court's oral findings of fact and opinion. The oral findings of fact and opinion shall not be relied upon as precedent in any other case. See Rule 152(c), Tax Court Practice and Procedure. II. This proceeding was heard as a Small Tax Case pursuant to the provisions of 7463 of the Internal Revenue Code of 1986 as amended and Rules 170 through 175 of the Tax Court Rules of Practice and Procedure. III. This bench opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986 as amended and Rule 152 of the -- Tax Court Rules of Practice and Procedure. Hereinafter in this bench opinion, all 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company section numbers refer to the Internal Revenue Code as amended and in effect for 2008 and all le numbers refer to the Tax Court Rules of Practice and 4 Procedure. IV. The section 6330(d) proceeding is subject to the Small Tax Court provisions of section 7463 and Rules 170 through 175. This bench opinion is made pursuant to the authority granted by section 7459(b) and Rule 152. Except as provided in Rule 152(c), this bench opinion shall not be cited as authority, and pursuant to 7463(b), the decision entered in this case shall not be treated as precedent for any other case. V. This collection due process (CDP) case was started in response to a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 (notice of determination) dated February 5, 2016, upholding a proposed levy to collect from petitioners the unpaid interest assessed on their tax liability for 2008. Petitioners paid the tax liability for 2008 before the notice of determination was issued, but did not pay the interest that had been assessed on the tax liability. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 Petitioners ask the Court to review the settlement officer's determination not to abate interest assessed on the tax liability for 2008. The Court agrees with respondent's determination not to abate the interest. While the Court understands petitioners' belief that the time the IRS took to complete the audit was too long, any delay in closing the audit is not a ministerial or managerial act as defined by law. Therefore, the IRS is not required to abate interest. VI. Mr. Sims and Mrs. Canon Sims were married and filed joint income tax returnp for 2008, ama ?nna 0- d Sometime prior to filing the petition in this case, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Mrs. Canon Sims died. Petitioner husband, George E. 16 17 18 19 Sims, is the surviving spouse of petitioner wife Ann E. Canon Sims. Petitioner husband signed and filed the petition in this case for himself and as "verbal representative of deceased taxpayer" for petitioner 20 wife. On March 16, 2016, the Court issued an order 21 22 23 24 25 to change the caption to its current form. The Court uses the term "petitioners" throughout the opinion to refer to Mr. Sims and Mrs. Sims and/or her estate. VII. Trial of this case was conducted on 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 9 February 13, 2017, in Houston, Texas. Petitioner husband represented himself and his deceased wife, and David B. Mora represented respondent. The partie Stipulation of Facts was admitted into evidence, along with attached exhibits. Petitioner husband resided in Texas when he petitioned the Court on his own behalf and as a personal representative for his deceased wife. Petitioners filed a petition with this 10 Court for redetermination of the deficiency for 2008. 11 Petitioners and respondent had reached a stipulated 12 13 14 15 16 17 18 19 20 21 22 23 24 settlement in that case, and the Court issued a decision dated January 15, 2015, in which the Court ordered and decided that there was a deficiency in income tax due for 2008 in the amount of $44,587, and no accuracy-related .polloy under section 6662(a). PenMk( l The order also stated that: "The parties stipulate that the Court may enter the foregoing decision in this case. "The parties further stipulate that interest as provided by law will be assessed on the deficiency in tax due from Petitioners. "The parties further stipulate that effective upon the entry of this Decision by the 25 Court, Petitioners waive restrictions contained in 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 7 1 2 I.R.C. section 6213(a) prohibiting assessment and collection of the deficiency in tax (plus interest) 3 until the decision of the Court has become final. " 4 5 6 7 8 9 10 11 12, 13 14 15 Petitioners paid the deficiency in income tax and then received a CP90, Intent to Seize Your Assets and Notice of Your Right to a Hearing (notice of intent to levy) dated August 31, 2015, notifying petitioners that the Internal Revenue Sepvice (IRS) may levy their assets and informing petitioners of their right to request a CDP hearing by September 25, 2015. The amount shown as due was the unpaid interest owed in the amount of $9, 844.75·. On September 10, 2015, respondent received from petitioners a timely filed Form 12153, Request for a Collection Due Process or Equivalent Hearing. 16 Petitioners did not check any of the boxes to request 17 18 19 20 a collection alternative. Rather, in the section labeled, "Lien, " petitioners checked the. box, "Discharge" and wrote as their reason, "IRS audited taxpayer for 2008. The field audit was completed 21 within a month, but the case has not been closed for 22 23 24 25 almost three years. This caused unneeded penalty and interest. Request for abatement previously filed. " On November 3, 2015, the IRS Appeals Office sent petitioners a letter stating it had received the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 5 6 7 8 9 request for a CDP hearing and scheduled a telephone CDP hearing for November 24, 2015. A copy of the letter was sent to petitioners' representative who had filed a power of attorney with the IRS. The Appeals Office settlement officer conducted the telephone CDP hearing with petitioners' representative on December 22, 2015. Petitioners argued that it took the IRS too long to finish the audit of their 2008 tax return. 10 Petitioners argued that the examination began on 11 October 27, 2011, and was closed on March 16, 2015, 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and that they had responded to the auditor's requests for information in a timely manner. The¡settlement officer informed petitioners that she could not find a reason for justifying abatement of interest. On February 5, 2016, the settlement officer sent petitioners a notice of determination sustaining the proposed levy. VII. In their petition, petitioners assert, "Taxpayer not responsible for inordinate lenth [sic] of time tax audit caused excessive penalties and interest." The decision in the deficiency proceeding, however, decided that the asserted accuracy-related penalties were not imposed. As to 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company , 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 the interest, petitioner husband testified that he believed that the settlement of the deficiency case was based on an agreement that there would not be any interest charged. However, petitioner husband conceded that the petitioners signed the stipulation and the decision document issued by the Court that stated statutory interest would be assessed on the stipulated income tax deficiency. Nonetheless, petitioners now continue to assert that the interest should be fully abated because of the length of time it took the IRS to complete the audit. In a CDP hearing, the settlement officer can make a determination under section 6404 with respect to abatement of interest. Gray v. Commissioner, 138 T.C. 297, 303 (2012). On Form 12153, petitioners argued that they should not be responsible for the interest because the audit took a long time to complete. The Court views petitioners' request as a request for an abatement of interest under section 6404. The Court has jurisdiction to review the Appeals determination 23 with regard to the interest that is the subject of 24 25 respondent's collection activities. Katz v. Commissioner, 115 T.C. 329, 340-341 (2000); see also 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 1 Gray v. Commissioner, 138 T.C. at 304-305. 2 3 4 5 The Commissioner is permitted to abate the assessment of interest on any deficiency attributable to any unreasonable error or delay by an officer or employee of the IRS in performing a ministerial or 6 managerial act. Sec. 6404(e) (1) (A). In enacting 7 8 9 10 11 12 13 14 15 16 17 18 section 6404(e), Congress did not intend abatement of interest to be granted routinely but rather where the failure to abate interest "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. The Court applies an abuse of discretion standard in reviewing the Commissioner's failure to abate interest. Woodral v. Commissioner, 112 T.C. 19, 23 (1999). ("The Commissioner's power to abate an assessment of interest involves the exercise of discretion, and we shall give due deference to the 19 Commissioner's discretion."); Krugman v. 20 Commissioner, 112 T.C. 230, 239 (1999). The taxpayer 21 must prove that the Commissioner exercised his 22 23 24 25 discretion arbitrarily, capriciously, or without sound basis in fact or law. Lee v. Commissioner, 113 T.C. 145, 149 (2016). A managerial act means an administrative 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 1 2 3 4 5 6 7 8 9 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 is not a ministerial or managerial act. Sec. 301.6404-2(b) Proced. & Admin. Regs. In is case, the act at issue was neither 10 ministerial pt managerial. The act in this case was 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the IRS auditor's determination of the proposed deficiency. While the Court recognizes that to petitioners the time that it took for the IRS to complete its audit of their tax return was very long, that act involved the IRS making a decision on the proper application of Federal tax law and therefore was not ministerial or managerial. The mere passage of time does not establish error or delay by the Commissioner in performing a ministerial act. Lee v. Commissioner, 113 T.C. at 150. Petitioners did not raise any issues of alleged error or delay in ministerial or managerial acts performed by the IRS, and the record does not contain any evidence of such acts. The Court concludes that respondent did not abuse his 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 12 discretion in denying petitione request for abatement of interest. In all other respects, respondent has shown that he has satisfied the procedural requirements imposed upon him by section 6330 and petitioners do not suggest otherwise. IX. To reflect the foregoing, an appropriate order and decision will be entered allowing respondent to proceed with collection action as determined in the notice of determination. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 10:10 a.m., the above- entitled matter was concluded.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com