number release date internal_revenue_service index number - ---------------------------- --------------------- ---------------------------- ---------------------------------- in re request for letter_ruling under sec_301_9100-3 of the income_tax regulations - department of the treasury washington dc person to contact --------------------------- id no --------------- ---------------------------------------------------- telephone number -------------------- --------------------- refer reply to cc ita - plr-161402-04 date date --------------------------------------------- ------- ------- ------- --------------- ------------- ------------- ------------------------------- legend taxpayer year1 year2 year3 dollar_figurea dollar_figureb dollar_figurec x dear -------------------------- this is in response to your letter dated date in your letter you requested an extension of time on behalf of taxpayer to make a late election to treat capital_gains as investment_income under sec_163 and sec_163 of the internal_revenue_code for year1 additionally you requested a revocation under sec_1 d - c of the income_tax regulations of the election previously made to treat capital_gains as investment_income under sec_163 for year1 the request to make the late election is based on sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations facts plr-161402-04 taxpayer prepared their own joint tax_return for year1 using commercial software taxpayer previously relied on outside assistance to prepare their personal returns however when their year1 return became due and their prior tax advisor had passed taxpayer decided to prepare the return the return was not simple it included rental income a business and significant securities transactions including net_long-term_capital_gains on schedule d of dollar_figurea it also reflected total investment_interest expense of dollar_figureb dollar_figurec of which was disallowed due to lack of net_investment_income taxpayer was not aware that they could have made an election to include in investment_income part or all of the net_capital_gain from the disposition of property_held_for_investment although an extended period is permitted pursuant to sec_301_9100-2 when a return is timely filed without making the election the provision requires an amended_return be filed within months of the due_date of taxpayer’s return excluding extensions taxpayer was not aware of the election the necessity for making it nor how it would impact their return or the provisions for amending their return until they sought assistance from tax professional x in the summer of year3 upon review of year1 and year2 x noted the item and explained the situation to taxpayer had taxpayer understood that an election existed and the ramifications it would have on their tax_liability certainly taxpayer would have timely made such an election therefore taxpayer requests consent of the commissioner to revoke the default election made inadvertently when taxpayer filed the return and permit a reasonable_time for taxpayer to make an informed election by filing an amended_return applicable law sec_163 of the code provides that in the case of a taxpayer other than a corporation the amount allowed as a deduction for investment_interest for any taxable_year shall not exceed the net_investment_income of the taxpayer for the taxable_year sec_163 of the code provides in pertinent part that investment_income means the sum of -- i gross_income from property_held_for_investment other than any gain taken into account under clause ii i ii the excess if any of -- i the net gain attributable to the disposition of property_held_for_investment over ii the net_capital_gain determined solely by taking into plr-161402-04 account gains and losses from dispositions of property_held_for_investment plus iii so much of the net_capital_gain referred to in clause ii ii or if lesser the net gain referred to in clause ii as the taxpayer elects to take into account under this clause sec_1_163_d_-1 b of the regulations provides that the election under sec_163 must be made on or before the due_date including extensions of the income_tax return for the taxable_year in which the net_capital_gain is recognized sec_1_163_d_-1 of the regulations provides that the election under sec_163 is revocable with the consent of the commissioner sec_301_9100-1 through of the procedure and administration regulations provide the standards the commissioner uses to determine whether to grant an extension of time to make a regulatory election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-1 of the regulations defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 of the regulations provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 of the regulations provides that requests for extensions of time for regulatory elections other than automatic changes covered under sec_301 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 of the regulations provides that a taxpayer will be deemed to have acted reasonably and in good_faith if the taxpayer -- i requests relief before the failure to make the regulatory election is discovered by the service plr-161402-04 ii inadvertently failed to make the election because of intervening events beyond the taxpayer's control iii failed to make the election because after exercising due diligence the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the service or v reasonably relied on a qualified_tax professional and the tax professional failed to make or advise the taxpayer to make the election section b of the regulations provides that a taxpayer will not be considered to have acted reasonably and in good_faith if the taxpayer -- i seeks to alter a return position for which an accuracy- related penalty could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires a regulatory election for which relief is requested ii was fully informed of the required election and related tax consequences but chose not to file the election or iii uses hindsight in requesting relief if specific facts have changed since the original deadline that make the election advantageous to a taxpayer the service will not ordinarily grant relief sec_301_9100-3 of the regulations provides that the commissioner will grant a reasonable extension of time only when the interests of the government will not be prejudiced by the granting of relief under paragraph c i the interests of the government are prejudiced if granting relief would result in a taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made conclusion taxpayer’s election is a regulatory election as defined under section b because the due_date of the election is prescribed in the regulations under d - b in the present situation the requirements of sec_301_9100-1 and sec_301_9100-3 of the regulations have been satisfied the information and representations made by taxpayer establish that taxpayer acted reasonably and in good_faith with this request plr-161402-04 furthermore granting an extension will not prejudice the interests of the government it is represented that there are no current or deferred benefits of electing to treat capital_gain as ordinary_income in excess of what is required to absorb the investment_interest expense accordingly taxpayer is granted an extension of time for making the election until days following the date of this ruling the election should be made by filing a revised form_4952 and schedule d and by including a copy of this ruling with an amended_return for year1 additionally taxpayer is granted consent to revoke the first election made on the year1 return these rulings are based upon information and representations submitted by taxpayer and accompanied by a penalty of perjury statement while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as expressly provided herein no opinion is expressed or implied concerning the federal_income_tax consequences of any aspect of any transaction or item discussed or referenced in this ruling this ruling is directed only to the taxpayer s who requested it sec_6110 of the code provides that it may not be used or cited as precedent sincerely yours associate chief_counsel income_tax accounting by clifford m harbourt______ clifford m harbourt senior technician reviewer branch attachments copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number -------------------- ----------------------------------------------------------- ------------------------------------------------------ ---------------------------------------------------------- ------------------- ------------------------- ------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------- id no ------------------ telephone number ---------------------- refer reply to cc corp b01 plr-135405-16 date date legend distributing ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ----------------------- controlled ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- -------------------------------------- llc2 llc7 ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ------------------------ ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ----------------------- date ---------------------- r -------- dear ----------------- this letter responds to your date letter submitted by your authorized representatives requesting that we supplement the private_letter_ruling dated date plr-123917-14 the initial ruling letter the material information submitted in the request for the initial ruling letter and this supplemental ruling_request is summarized below capitalized or underlined terms not defined in this letter have the meanings assigned to them in the initial ruling letter plr-135405-16 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalties of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process this letter is issued pursuant to section dollar_figure of revproc_2016_1 2016_1_irb_1 regarding a significant issue under sec_355 the ruling contained in this letter only addresses a discrete legal issue involved in the proposed transaction this office expresses no opinion as to the overall tax consequences of the proposed transaction or as to any issue not specifically addressed by the ruling below supplemental facts on date pursuant to the bankruptcy plan_of_reorganization confirmed by the bankruptcy court the proposed transaction effecting the separation of distributing’s busine sec_1 and busine sec_2 was completed distributing and llc7 remain under_the_jurisdiction_of_the_bankruptcy_court in the bankruptcy proceeding any transaction or transactions that distributing and llc7 may undertake with respect to their remaining assets and subsidiaries and their remaining outstanding debt has not yet been confirmed by the bankruptcy court supplemental representations a b the value of the consideration received by the llc2 first lien creditors in exchange for their llc2 first lien debt in the distribution was significantly approximately r less than the principal_amount of such llc2 first lien debt it is anticipated that the distributing shareholders’ distributing stock will be cancelled for no consideration in any subsequent restructuring of distributing and llc7 in the bankruptcy proceeding supplemental ruling based solely on the information and representations submitted in connection with this supplemental ruling_request and the request for the initial ruling letter we rule as follows because the distribution of controlled stock was solely to the llc2 first lien creditors in a title_11_case the value of the consideration received by the llc2 first lien creditors in the distribution was significantly approximately r less than the principal_amount of the llc2 first lien debt exchanged therefor and it is anticipated that the distributing shareholders’ distributing stock will plr-135405-16 be cancelled for no consideration in any subsequent restructuring of distributing and llc7 in the bankruptcy proceeding the distribution was not used principally as a device for the distribution of earnings_and_profits of distributing or controlled or both sec_355 and sec_1_355-2 caveats no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter except as specifically addressed by the ruling above in particular no opinion is expressed concerning any aspect of any transaction or item occurring as part of the bankruptcy proceeding whether prior to or following the proposed transaction or the effect of any such transaction or item on the ruling above procedural statements this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling sincerely frances l kelly frances l kelly senior counsel branch office of associate chief_counsel corporate cc


internal_revenue_service number release date index number ----------------------------------- ---------------------------------------- ------------------------------------ ------------- -------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------------------------- telephone number --------------------- refer reply to cc psi b02 plr-144583-09 date march legend x ------------------------------------------------------------------- ------------------------ state -------- properties d1 year a x y ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- --------------- plr-144583-09 dear --------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x by x's authorized representative requesting a ruling that receipts from its parking facility business are not passive_investment_income within the meaning of sec_1362 of the internal_revenue_code facts the information submitted states that x is incorporated in state x elected to be treated as an s_corporation effective d1 x has accumulated_earnings_and_profits x owns operates manages and leases commercial real_estate consisting of parking facilities the properties among its other real_estate businesses x represents that it owns some of the properties through qualified subchapter_s subsidiaries and the others through partnerships with a third party x manages the partnerships and the properties they hold for a management fee paid_by the partnerships x has a employees who spend time performing work related to the properties x has also made strategic use of a third-party national parking management company to provide labor and field management at x’s direction through its staff as well as through the management company x provides various services to the properties in its parking facility business these services include accounting and bookkeeping internal auditing billing and collections daily property inspection common area maintenance janitorial services landscaping maintenance and repair of building structural_components and systems plumbing electrical and mechanical elevator maintenance and repair provision of utilities pest control and provision of security services through a third-party in addition x handles the usual leasing and administrative functions involved in leasing portions of its parking facilities for use by other businesses for year x received dollar_figurex in receipts and x paid_or_incurred dollar_figurey expenses other than depreciation with respect to the properties law and analysis sec_1361 defines an s_corporation as a small_business_corporation for which an election under sec_1362 is in effect for the taxable_year sec_1362 provides than an election under sec_1362 shall be terminated whenever at any time after the first day of the first taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation sec_1362 provides that an election under sec_1362 shall be terminated plr-144583-09 whenever the corporation has accumulated_earnings_and_profits at the close of each of consecutive taxable years and has gross_receipts for each of such taxable years more than percent of which are passive_investment_income any termination under this paragraph shall be effective on and after the first day of the first taxable_year beginning after the third consecutive taxable_year referred to above sec_1362 provides that except as otherwise provided the term passive_investment_income means gross_receipts derived from royalties rents dividends interest annuities and sales or exchanges of stock_or_securities sec_1_1362-2 of the income_tax regulations provides that rents does not include rents derived in the active trade_or_business of renting property rents received by a corporation are derived in an active trade_or_business of renting property only if based on all the facts and circumstances the corporation provides significant services or incurs substantial costs in the rental business generally significant services are not rendered and substantial costs are not incurred in connection with net leases whether significant services are performed or substantial costs are incurred in the rental business is determined based upon all the facts and circumstances including but not limited to the number of persons employed to provide the services and the types and amounts of costs and expenses_incurred other than depreciation conclusion based solely on the facts and the representations submitted we conclude that the receipts that x derives from the properties are not passive_investment_income as described in sec_1362 except as specifically set forth above we express no opinion as to the federal tax consequences of the transaction described above under any other provision of the code specifically we express no opinion on whether x is a small_business_corporation eligible to make an s election further the passive_investment_income rules of sec_1362 are completely independent of the passive_activity rules of section sec_469 unless an exception under sec_469 applies the rental_activity remains passive for purposes of sec_469 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-144583-09 pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely bradford r poston senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index number u i l no washington dc person to contact telephone number refer reply to cc psi plr-112758-00 date date legend company state shareholders a dear this letter responds to a letter dated date and subsequent correspondence requesting a ruling on behalf of company under sec_1362 of the internal_revenue_code the information submitted discloses that company was incorporated on a in state company has several shareholders shareholders it is represented that company has intended to be an s_corporation since its incorporation however company discovered that its s election had not been timely filed company requests a ruling that its sec_1362 election will be treated as timely made for its taxable_year that begins on a sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 explains when an s election will be effective generally if an s plr-112758-00 election is made within the first two and one half months of a corporation’s taxable_year then that corporation will be treated as an s_corporation for the year in which the election is made sec_1362 provides that if an s election is made after the first two and one half months of a corporation’s taxable_year then that corporation will not be treated as an s_corporation until the taxable_year following the year in which the s election is made sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply applying the relevant law to the facts submitted and representations made we rule that company's sec_1362 election will be treated as timely made for its taxable_year that begins on a however this ruling is contingent on company filing form_2553 election by a small_business_corporation with an effective date of a with the appropriate service_center within days from the date of this ruling a copy of this letter should be attached to the form_2553 except as specifically set forth above we express no opinion concerning the federal tax consequences of the foregoing facts specifically we express no opinion on whether company otherwise qualifies as an s_corporation the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours robert honigman assistant to the chief branch office of the associate chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes


t c memo united_states tax_court james vernon williams petitioner v commissioner of internal revenue respondent docket no 13821-03l filed date p filed a petition for judicial review pursuant to sec_6330 i r c in response to a determination by r that levy action was appropriate held because p has advanced groundless complaints in dispute of the notice_of_intent_to_levy r’s determination to proceed with collection action is sustained held further a penalty under sec_6673 i r c is due from p and is awarded to the united_states in the amount of dollar_figure james vernon williams pro_se alan j tomsic for respondent memorandum findings_of_fact and opinion wherry judge this case arises from a petition for judicial review filed in response to a notice_of_determination concerning collection action under sec_6330 the issues for decision are whether respondent may proceed with collection action as so determined and whether the court sua sponte should impose a penalty under sec_6673 findings_of_fact some of the facts have been stipulated and are so found the stipulations of the parties with accompanying exhibits are incorporated herein by this reference petitioner filed form sec_1040 u s individual_income_tax_return for the and taxable years on or about date and date respectively on each of these returns petitioner reported dollar_figure on substantially_all pertinent lines including dollar_figure of total income and dollar_figure of total_tax the return also incorporated petitioner’s request for a refund of dollar_figure derived from estimated_tax payments and the amount applied from his return petitioner attached to each return a statement contending inter alia that no law unless otherwise indicated all section references are to the internal_revenue_code_of_1986 as amended and all rule references are to the tax_court rules_of_practice and procedure established his liability for income taxes or required him to file a return respondent issued to petitioner a statutory_notice_of_deficiency for on date and for on date the deficiencies determined for and were dollar_figure and dollar_figure respectively respondent also determined accuracy-related_penalties under sec_6662 in the respective amounts of dollar_figure and dollar_figure petitioner at no time petitioned this court for redetermination of the deficiency and penalty reflected in either notice respondent assessed tax penalty and interest amounts due for and on date and sent notice s of balance due on that date on date respondent issued to petitioner a final notice_of_intent_to_levy and notice of your right to a hearing with respect to his unpaid liabilities for and petitioner executed on date and timely submitted to respondent a form request for a collection_due_process_hearing with multiple attachments setting forth his disagreement with the proposed levy he challenged the validity the notice_of_intent_to_levy incorporated in addition to the income_tax liabilities dealt with in the notice_of_determination and at issue in this proceeding civil penalties under sec_6702 for the filing of frivolous returns this court lacks jurisdiction to review any issues related to those penalties 115_tc_324 of and requested that the appeals officer have at the hearing copies of documents pertaining to among other things the underlying tax_liability the assessment the notice_and_demand for payment and the verification from the secretary that the requirements of any applicable law or procedure had been met appeals officer julieanne m petersen ms petersen of the internal_revenue_service irs office of appeals in las vegas nevada sent petitioner a letter dated date scheduling a hearing for date the letter briefly outlined the hearing process advised that audio or stenographic recording of hearings was not allowed and explained the opportunity to present and discuss non-frivolous material the letter also warned petitioner as follows the courts have deemed the arguments that are contained in your previous correspondence with the internal_revenue_service frivolous they will not hear them and neither will they be addressed at your collection_due_process_hearing petitioner responded on date with a 17-page letter asserting his right to record the hearing as well as reiterating and expanding upon arguments advanced in his previous communications ms petersen sent a follow-up letter dated date in which she specifically addressed petitioner’s arguments cited numerous cases contrary to the positions being taken by petitioner alerted petitioner that his present noncompliance with filing_requirements would render collection alternatives unavailable and pointed petitioner to 115_tc_576 and other cases establishing imposition of sanctions in analogous circumstances ms petersen enclosed with the letter certified transcripts of account and copies or summaries of the various cited cases petitioner again responded with a lengthy letter dated date in the same vein as his earlier submissions as regards the hearing he stated i’ll be there 00pm with recorder running and plan to bring a witness or two petitioner appeared for the scheduled hearing on date but the hearing did not proceed when ms petersen refused to permit petitioner to record the meeting on date respondent issued to petitioner the aforementioned notice_of_determination concerning collection action under sec_6330 sustaining the proposed levy action an attachment to the notice addressed the verification of legal and procedural requirements the issues raised by the taxpayer and the balancing of efficient collection and intrusiveness according to the attachment petitioner did not raise any non-frivolous arguments petitioner’s petition disputing the notice_of_determination was filed with the court on date and reflected an address in pahrump nevada therein petitioner claimed that he was denied a hearing on account of the inability to record referenced the sec_7401 authorization requirement for civil actions and demanded his hearing and sanctions against agent s on date respondent filed a motion for summary_judgment pursuant to rule petitioner was directed to file any response to respondent’s motion on or before date the court permitted the filing on date of an untimely response wherein petitioner propounded frivolous rhetoric including assertions of fraud on the part of respondent the court on date issued an order denying the motion for summary_judgment ruling as follows as respondent correctly notes in the motion for summary_judgment issues raised by petitioner during the administrative process and before us have been repeatedly rejected by this and other courts or are refuted by the documentary record moreover the court observes that maintenance of similar arguments has served as grounds for imposition of penalties under sec_6673 however the case in its current posture presents a procedural shortcoming on date this court issued 121_tc_8 in which it was held that taxpayers are entitled pursuant to sec_7521 to audio record sec_6330 hearings the taxpayer in that case had refused to proceed when denied the opportunity to record and we remanded the case to allow a recorded appeals hearing id in contrast we have distinguished and declined to remand cases where the taxpayer had participated in an appeals_office hearing albeit unrecorded and where all issues raised by the taxpayer could be properly decided from the existing record e g id pincite frey v commissioner tcmemo_2004_87 durrenberger v commissioner tcmemo_2004_44 brashear v commissioner tcmemo_2003_196 kemper v commissioner tcmemo_2003_195 the circumstances of the instant case are analogous to those in keene v commissioner supra and diverge from those where it was determined that remand was not necessary and would not be productive critically the notice_of_determination was issued on date although this date is subsequent to the opinion in keene v commissioner supra petitioner was not afforded an opportunity for a recorded conference further because the requested face-to-face hearing was not held there still exists a possibility that petitioner might have raised one or more nonfrivolous issues if the meeting had proceeded in this situation the court declines to characterize the failure to allow recording as harmless error hence the court will deny respondent’s motion for summary_judgment at this time as in keene v commissioner supra pincite however we admonish petitioner that if he persists in making frivolous and groundless tax_protester arguments in any further proceedings with respect to this case rather than raising relevant issues as specified in sec_6330 the court may consider granting a future motion for summary_judgment in such an instance the court would also be in a position to impose a penalty under sec_6673 on date the court also issued an order explaining the returning unfiled of various other procedurally improper documents received from petitioner during october and november we noted that the documents were replete with frivolous contentions and tax_protester rhetoric and in light of petitioner’s continued recalcitrance reiterated our earlier warning regarding penalties under sec_6673 this case was called from the calendar of the trial session of the court in las vegas nevada on date and a trial was held on that date at the outset the court reminded petitioner that respondent’s motion for summary_judgment had been denied because recording was not permitted and we explained as follows now the point that i want to make sure that you understand here is that this hearing is being recorded and it will be recorded verbatim so that any issues that you wish to raise you need to raise them here because you won’t get another chance to raise them somewhere else unless i conclude at the end of this trial that there are issues which must be ruled upon by an appeals officer and which are legitimate issues so that i can determine if that appeals officer abused their discretion if there are no legitimate issues then there is nothing for me to determine that the appeals officer has abused--that is that there is no issue that the appeals officer could have abused their discretion on and so there is no need to remand the case petitioner proceeded to make a lengthy argument focusing primarily on his contention that in denying a recorded hearing and in refusing to clarify the statutes and regulations used to determine any taxable_income respondent violated the letter and intent of the law petitioner asked that the determination be vacated and that an award be issued under sec_7433 however petitioner declined to be sworn in or to offer any other testimony or evidence following the proceedings each party filed a posttrial brief petitioner recapitulated his arguments made at trial and prayed for a series of remedies most of which are not within the jurisdiction of this court opinion i collection actions a general rules sec_6331 authorizes the commissioner to levy upon all property and rights to property of a taxpayer where there exists a failure to pay any_tax liability within days after notice_and_demand for payment sec_6331 and sec_6330 then set forth procedures generally applicable to afford protections for taxpayers in such levy situations sec_6331 establishes the requirement that a person be provided with at least days’ prior written notice of the commissioner’s intent to levy before collection may proceed sec_6331 also indicates that this notification should include a statement of available administrative appeals sec_6330 expands in several respects upon the premise of sec_6331 forbidding collection by levy until the taxpayer has received notice of the opportunity for administrative review of the matter in the form of a hearing before the irs office of appeals sec_6330 grants a taxpayer who so requests the right to a fair hearing before an impartial appeals officer sec_6330 addresses the matters to be considered at the hearing sec_6330 matters considered at hearing --in the case of any hearing conducted under this section-- requirement of investigation --the appeals officer shall at the hearing obtain verification from the secretary that the requirements of any applicable law or administrative procedure have been met issues at hearing -- a in general --the person may raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy including-- i appropriate spousal defenses ii challenges to the appropriateness of collection actions and iii offers of collection alternatives which may include the posting of a bond the substitution of other assets an installment_agreement or an offer-in-compromise b underlying liability --the person may also raise at the hearing challenges to the existence or amount of the underlying tax_liability for any_tax period if the person did not receive any statutory_notice_of_deficiency for such tax_liability or did not otherwise have an opportunity to dispute such tax_liability once the appeals officer has issued a determination regarding the disputed collection action sec_6330 allows the taxpayer to seek judicial review in the tax_court or a u s district_court depending upon the type of tax in considering whether taxpayers are entitled to any relief from the commissioner’s determination this court has established the following standard of review where the validity of the underlying tax_liability is properly at issue the court will review the matter on a de novo basis however where the validity of the underlying tax_liability is not properly at issue the court will review the commissioner’s administrative determination for abuse_of_discretion 114_tc_604 b analysi sec_1 appeals hearing hearings conducted under sec_6330 are informal proceedings not formal adjudications 115_tc_329 115_tc_35 there exists no right to subpoena witnesses or documents in connection with sec_6330 hearings 118_tc_365 affd 329_f3d_1224 11th cir 118_tc_162 davis v commissioner supra pincite taxpayers are entitled to be offered a face-to-face hearing at the appeals_office nearest their residence where the taxpayer declines to participate in a proffered face-to-face hearing hearings may also be conducted by telephone or correspondence katz v commissioner supra pincite- dorra v commissioner tcmemo_2004_16 sec_301 d q a-d6 and d7 proced admin regs furthermore once a taxpayer has been given a reasonable opportunity for a hearing but has failed to avail himself or herself of that opportunity we have approved the making of a determination to proceed with collection based on the appeals officer’s review of the case file see eg taylor v commissioner tcmemo_2004_25 leineweber v commissioner tcmemo_2004_17 armstrong v commissioner tcmemo_2002_224 gougler v commissioner tcmemo_2002_185 mann v commissioner tcmemo_2002_48 thus a face-to-face meeting is not invariably required regulations promulgated under sec_6330 likewise incorporate many of the foregoing concepts as follows q-d6 how are cdp hearings conducted a-d6 cdp hearings are informal in nature and do not require the appeals officer_or_employee and the taxpayer or the taxpayer’s representative to hold a face-to-face meeting a cdp hearing may but is not required to consist of a face- to-face meeting one or more written or oral communications between an appeals officer_or_employee and the taxpayer or the taxpayer’s representative or some combination thereof q-d7 if a taxpayer wants a face-to-face cdp hearing where will it be held a-d7 the taxpayer must be offered an opportunity for a hearing at the appeals_office closest to taxpayer’s residence or in the case of a business taxpayer the taxpayer’s principal_place_of_business if that is not satisfactory to the taxpayer the taxpayer will be given an opportunity for a hearing by correspondence or by telephone if that is not satisfactory to the taxpayer the appeals officer_or_employee will review the taxpayer’s request for a cdp hearing the case file any other written communications from the taxpayer including written communications if any submitted in connection with the cdp hearing and any notes of any oral communications with the taxpayer or the taxpayer’s representative under such circumstances review of those documents will constitute the cdp hearing for the purposes of sec_6330 sec_301_6330-1 q a-d6 and d7 proced admin regs this court has cited the above regulatory provisions and corresponding promulgations under sec_6320 with approval see eg taylor v commissioner supra leineweber v commissioner supra dorra v commissioner supra gougler v commissioner supra with respect to the instant matter the record reflects that petitioner was provided with an opportunity for a face-to-face hearing on date the hearing did not proceed when petitioner was not permitted to record the meeting as explained in our previous order in this case in 121_tc_8 this court held that taxpayers are entitled pursuant to sec_7521 to audio record sec_6330 hearings the taxpayer in that case had refused to proceed when denied the opportunity to record and we remanded the case to allow a recorded appeals hearing id in contrast again as noted in our date order we have distinguished and declined to remand cases where the taxpayer had participated in an appeals_office hearing albeit unrecorded and where all issues raised by the taxpayer could be properly decided from the existing record e g id pincite frey v commissioner tcmemo_2004_87 durrenberger v commissioner tcmemo_2004_44 brashear v commissioner tcmemo_2003_196 kemper v commissioner tcmemo_2003_195 stated otherwise cases will not be remanded to appeals nor determinations otherwise invalidated merely on account of the lack of a recording when to do so is not necessary and would not be productive see eg frey v commissioner supra durrenberger v commissioner supra brashear v commissioner supra kemper v commissioner supra see also 117_tc_183 a principal scenario falling short of the necessary or productive standard exists where the taxpayers rely on frivolous or groundless arguments consistently rejected by this and other courts see eg frey v commissioner supra brashear v commissioner supra kemper v commissioner supra because no hearing had been conducted at all in petitioner’s case we declined to grant respondent’s motion for summary_judgment the record as it then existed did not foreclose the possibility that petitioner might have raised valid arguments had a hearing been held accordingly we provided petitioner an opportunity before the court at the trial session in las vegas to identify any legitimate issues he wished to raise that could warrant further consideration of the merits of his case by the appeals_office or this court petitioner however merely continued to focus on the denial of a recorded hearing and offered no substantive issues of merit hence despite repeated warnings and opportunities the only contentions other than the recorded hearing advanced by petitioner are as will be further discussed below of a nature previously rejected by this and other courts the record therefore does not indicate that any purpose would be served by remand or additional proceedings the court concludes that all pertinent issues relating to the propriety of the collection determination can be decided through review of the materials before it review of underlying liabilities statutory notices of deficiency for and were issued to petitioner and he has at no time alleged that he did not receive these notices he did not timely petition this court for redetermination when he had the opportunity to do so accordingly petitioner is precluded under sec_6330 from disputing his underlying and liabilities in this proceeding his remaining contentions generally challenging the existence of any statute imposing or requiring him to pay income_tax warrant no further comment see 737_f2d_1417 5th cir we perceive no need to refute these arguments with somber reasoning and copious citation of precedent to do so might suggest that these arguments have some colorable merit review for abuse_of_discretion petitioner has also made various arguments relating to aspects of the assessment and collection procedures that we review for abuse_of_discretion action constitutes an abuse_of_discretion under this standard where arbitrary capricious or without sound basis in fact or law 112_tc_19 federal tax assessments are formally recorded on a record of assessment in accordance with sec_6203 the commissioner is not required to use form 23c in making an assessment roberts v commissioner t c pincite furthermore sec_6330 mandates neither that the appeals officer rely on a particular document in satisfying the verification requirement nor that the appeals officer actually give the taxpayer a copy of the verification upon which he or she relied 119_tc_252 nestor v commissioner t c pincite a form_4340 certificate of assessments payments and other specified matters for instance constitutes presumptive evidence that a tax has been validly assessed pursuant to sec_6203 davis v commissioner t c pincite and cases cited thereat consequently absent a showing by the taxpayer of some irregularity in the assessment procedure that would raise a question about the validity of the assessments a form_4340 reflecting that tax_liabilities were assessed and remain unpaid is sufficient to support collection action under sec_6330 id pincite we have specifically held that it is not an abuse_of_discretion for an appeals officer to rely on form_4340 nestor v commissioner supra pincite davis v commissioner supra pincite or a computer transcript of account schroeder v commissioner tcmemo_2002_190 mann v commissioner tcmemo_2002_48 to comply with sec_6330 here the record contains forms for and indicating that assessments were made for each of these years and that taxes remain unpaid petitioner has cited no irregularities that would cast doubt on the information recorded thereon in addition to the specific dictates of sec_6330 the secretary upon request is directed to furnish to the taxpayer a copy of pertinent parts of the record of assessment setting forth the taxpayer’s name the date of assessment the character of the liability assessed the taxable_period if applicable and the amounts assessed sec_6203 sec_301_6203-1 proced admin regs a taxpayer receiving a copy of form_4340 has been provided with all the documentation to which he or she is entitled under sec_6203 and sec_301_6203-1 proced admin regs roberts v commissioner supra pincite n this court likewise has upheld collection action where taxpayers were provided with literal transcripts of account so-called mftrax see eg frank v commissioner tcmemo_2003_88 swann v commissioner tcmemo_2003_70 the date letter to petitioner from ms petersen enclosed copies of certified transcripts of account the court concludes that petitioner’s complaints regarding the assessments and verification are meritless petitioner has denied receiving the notice_and_demand for payment that sec_6303 establishes should be given within days of the making of an assessment however a notice of balance due constitutes a notice_and_demand for payment within the meaning of sec_6303 craig v commissioner supra pincite the forms indicate that petitioner was sent notices of balance due for each of the tax years involved petitioner has also attempted to raise sec_7401 as a defense sec_7401 directs that no civil_action for inter alia collection or recovery_of taxes shall be commenced unless authorized or sanctioned by the secretary this section has no bearing on the instant proceeding in that the levying upon property under sec_6331 is an administrative action that does not necessitate the institution of a civil suit lastly in his petition petitioner requested sanctions against agent s he also cited sec_7214 and sec_7433 at trial and on brief the record in this case reflects nothing that would warrant any form of sanctions against irs personnel furthermore statutes such as sec_7214 and sec_7433 imposing criminal and civil penalties respectively against irs personnel in enumerated circumstances are not within the jurisdiction of this court thus with respect to those issues enumerated in sec_6330 and subject_to review in collection proceedings for abuse_of_discretion petitioner has not raised any spousal defenses valid challenges to the appropriateness of the collection action or collection alternatives as this court has noted in earlier cases rule b states that a petition for review of a collection action shall contain clear and concise assignments of each and every error alleged to have been committed in the notice_of_determination and that any issue not raised in the assignments of error shall be deemed conceded see lunsford v commissioner t c pincite 114_tc_176 for completeness we have addressed various points advanced by petitioner during the administrative process and this litigation but the items listed in sec_6330 were not pursued in any proceedings accordingly the court concludes that respondent’s determination to proceed with collection of petitioner’s tax_liabilities was not an abuse_of_discretion ii sec_6673 penalty sec_6673 authorizes the court to require the taxpayer to pay a penalty not in excess of dollar_figure when it appears to the court that inter alia proceedings have been instituted or maintained by the taxpayer primarily for delay or that the taxpayer’s position in such proceeding is frivolous or groundless in pierson v commissioner t c pincite we warned that taxpayers abusing the protections afforded by sec_6320 and sec_6330 through the bringing of dilatory or frivolous lien or levy actions will face sanctions under sec_6673 we have since repeatedly disposed of cases premised on arguments akin to those raised herein summarily and with imposition of the sec_6673 penalty see eg craig v commissioner t c pincite and cases cited thereat with respect to the instant matter we are convinced that petitioner instituted this proceeding primarily for delay throughout the administrative and pretrial process petitioner advanced contentions and demands previously and consistently rejected by this and other courts he submitted lengthy communications quoting citing using out of context and otherwise misapplying portions of the internal_revenue_code regulations supreme court decisions and other authorities while his procedural stance concerning recording was correct he ignored the court’s explicit warning that any further proceedings would be justified only in the face of relevant and nonfrivolous issues moreover petitioner was on multiple occasions expressly alerted to the potential use of sanctions in his case yet he appeared at the trial session in las vegas without any legitimate evidence or argument in support of his position he instead continued to espouse those positions that had been explicitly addressed and rejected in this court’s order of date or in other cases previously decided by the court the court sua sponte concludes that a penalty of dollar_figure should be awarded to the united_states in this case to reflect the foregoing an appropriate decision will be entered


id office uilc cca_2010100508410537 ---------- number release date from ------------------- sent tuesday october am to -------------------- cc ------------------------------------------------------------- subject re tefra on the issue of whether the recharacterization of a loan by corp a to partnership b is an affected_item as to corp a the tax at the corp a level is not an affected_item because corp a is not a partner in partnership b and is not bound the b's treatment or determination of the amounts received from a affected items only exist with respect to partners since mom is not a partner in b any deemed gift by her to the partners of b is not an affected_item as to her thus any gift_tax would be asserted against her through a non-tefra notice_of_deficiency issued within her normal non-tefra period for assessment


t c memo united_states tax_court laurence l and patricia jacobs petitioners v commissioner of internal revenue respondent james w and janice a geis petitioners v commissioner of internal revenue respondent docket nos filed date laurence l jacobs patricia jacobs james w geis and janice a geis pro sese jordan s musen and michael a skeen for respondent memorandum opinion wells judge respondent determined that petitioners are these cases hereinafter referred to as case were consolidated for trial briefing and opinion - - not entitled to an abatement of interest pursuant to sec_6404 relating to their taxable years petitioners meet the net_worth limitations of sec_7430 c a the only issue for decision is whether respondent's refusal to abate interest for the period of time between date and date was an abuse_of_discretion background some of the facts have been stipulated for trial pursuant to rule the parties' stipulations are incorporated into this memorandum opinion by reference and accordingly are found as facts in the instant case when petitioner laurence jacobs filed his petition he resided in newport beach california when petitioner patricia jacobs filed her petition she resided in huntington beach california when petitioners james and janice geis filed their petition they resided in mission viejo california petitioners are limited partners in tummies ltd partnership tlp tlp is a limited_partnership subject_to the provision sec_2 unless otherwise indicated all section references are to the internal_revenue_code as amended and all rule references are to the tax_court rules_of_practice and procedure tummies ltd partnership tlp was formed by brothers john and william knoke in date for the purpose of developing a group of characters a playboard and an interactive record known as the interactor all of which are collectively known as the tummies the partnership's promoters hoped that the cartoon characters would be licensed for use in children's continued - - of sections in date respondent selected tlp's partnership return for examination the principal issue during the examination was the deductibility of research_and_development r d costs of dollar_figure for date through date on date respondent mailed notices of beginning administrative proceedings to the individual limited partners of tlp this was the first time that respondent notified the limited partners in writing that the partnership return for was under examination the first revenue_agent to work on the examination of tlp's return was jean dosil agent dosil began gathering research materials and analyzing the r d issue later agent dosil was reassigned to respondent's appeals_office and by date the partnership examination was reassigned to revenue_agent fred mcbrien throughout his examination agent mcbrien dealt with two representatives of tlp its tax_matters_partner john knoke and its attorney william reising by date tlp and respondent executed a form signed by the tax_matters_partner and mr reising which extended the period of limitation sec_3 continued cartoon programs and sold as a three-dimensional toy and game with a record that could feed off the popularity and recognition of the cartoon program ‘ john knoke is the general_partner of tlp and has chief decision-making responsibility and control_over its operation q4e- for tlp's year indefinitely the extension of the period of limitations could have been terminated if either tlp's tax_matters_partner or its attorney had submitted a form 872-n but none was ever submitted the form was not terminated until notices of final_partnership_administrative_adjustment fpaa were issued to the tax_matters_partner and to the limited partners during the examination agent mcbrien experienced difficulties obtaining from the tax_matters_partner various legal and business documents relating to the r d expenses agent mcbrien also had to make a number of efforts to locate and compile the limited partners' schedules k-1 partner's share of income credits deductions etc the schedules k-1 were needed to determine the percentage of each limited partner's allocable loss agent mcbrien made at least two trips to the tax matters partner's house in san clemente california to secure the forms it was important to obtain the schedules k-1 from the tax_matters_partner instead of the fresno service_center fsc in order to expedite the examination obtaining the forms from fresno could take up to three times longer than obtaining copies from the tax_matters_partner by the close of the examination agent mcbrien had a form 872-n been submitted respondent would have been required to issue a notice of final_partnership_administrative_adjustment within days of receiving the form 872-n - had all the schedules k-1 for tax_year but was never able to procure all of the schedules k-1 for during the period date through date there was never a time when no work was being done on the tlp file agent mcbrien never received any complaints from any of the limited partners or tlp'ss representatives regarding the speed of the examination at the conclusion of his examination agent mcbrien determined that all r d losses for tax years and should be disallowed but that no penalties should be determined with an attached cover letter dated date agent mcbrien sent mr reising a tentative position paper proposing to disallow the r d expenses claimed for agent mcbrien then contacted the tax_matters_partner and mr reising about setting a time for a closing conference the date of the closing conference is unknown by august or date agent mcbrien finished his examination of tlp complete agreement was not reached and the case was ultimately sent to appeals to resolve the remaining disputed issues obtaining the schedules k-1 was necessary because the tlp audit involved a series of transactions straddling the and taxable years it was not prudent to conduct a separate audit for each of those taxable years because the series of transactions was part of the larger issue of whether the r d expenses were deductible date through date sometime after his last meeting with tlp's representatives during date but before date agent mcbrien forwarded the tlp file to respondent's quality review branch to be reviewed for compliance with internal procedures the exact date or even the approximate date that quality review received the tlp file is unknown because tlp is governed by the tax equity and fiscal responsibility act of tefra publaw_97_248 96_stat_324 quality review had to perform special compliance checks michael lester was assigned to the quality review branch during as a tefra coordinator agent lester was responsible for reviewing tefra cases to make sure that the administrative steps had been followed properly he was also responsible for preparing the appropriate 60-day or 150-day letter agent lester did not remember the tlp case nor did he recall when his unit received the case agent lester remembered keeping current with his caseload and did not recall a backlog of cases in quality review when he was there during date quality review returned the tlp case to agent mcbrien's examination group because the case file did not have any of the schedules k-1 needed for processing quality review also asked agent mcbrien to look into other substantive issues and to reexamine whether it was appropriate to impose - penalties agent mcbrien testified that the examination group forwarded the schedules k-1 to quality review and that his group no longer had possession of the forms after the case was sent to quality review during date the examination group finished its work and returned the file to quality review the record is silent as to what happened with the tlp case from date through date date through date on date the fsc issued the limited partners a 60-day letter for the tax_year proposing to disallow the r d losses based upon agent mcbrien's findings by letter dated date tlp's tax_matters_partner requested an appeal of the 60-day letter on date the case was assigned to appeals officer beth thurston to resolve the disputed issues she checked the case into her inventory verified that the period of limitations had not expired and that there were sufficient documents in the file and reviewed the issues to see if they were sufficiently developed to be considered by appeals tlp's first representative during the appeals process was mr reising appeals officer thurston and mr reising discussed the issues of the case during a telephone conference on date during date appeals officer thurston mailed an appointment letter to mr reising mr reising was involved with an unrelated ongoing trial and consequently was not able to meet with appeals officer thurston until date appeals officer thurston asked mr reising to submit a position paper at the january meeting mr reising did not submit a position paper at the january meeting and was prepared to discuss only his belief that the period of limitations on assessment for tax years and had expired appeals officer thurston replied by showing mr reising the form 870-o with his signature because mr reising was not prepared to discuss the substantive r d issue appeals officer thurston asked him to submit the position paper by date on date mr reising called appeals officer thurston to inform her that he would have the position paper completed that week on date during a telephone call mr reising told appeals officer thurston that he was still working on the position paper during date appeals officer thurston finally received mr reising's position paper dated date shortly after receiving the position paper appeals officer thurston was sent to training for approximately weeks the tlp case was not reassigned to another appeals officer while she was in training appeals officer thurston was not able because of the training sessions to respond to mr reising's position paper - until date when she wrote a letter to mr reising addressing his arguments after trading several telephone messages on date and again on date appeals officer thurston and mr reising spoke by telephone by that time discussions had switched from the substance of the r d issue to how individual limited partners would be affected by the r d loss disallowance specifically mr reising was concerned about the treatment of limited partners who sold their partnership interests and reported gains after and after the date telephone discussions appeals officer thurston and janet spaulding an appeals tefra coordinator worked on formulating a settlement offer for tlp appeals officer thurston attempted to accommodate mr reising's request that separate settlements be undertaken for the individual limited partners who sold their interests however she and appeals coordinator spaulding later determined that separate settlements for those partners would be impractical from date through date appeals officer thurston was still working with appeals coordinator spaulding to see if they could address the concerns of limited partners who wanted a separately computed settlement they discussed the matter with their supervisors but did not prepare any specific forms or documents on date appeals -- - officer thurston left a message for mr reising mr reising failed to return her call and on date appeals officer thurston sent a fax to mr reising's office the fax stated in pertinent part that due to more pressing priorities i have let this matter sit on the back burner however now that we have essentially agreed upon a settlement i am sure you are as interested in concluding the matter as i am later that day mr reising called appeals officer thurston to let her know that he was no longer representing tlp and that william knoke was now tlp's representative appeals officer thurston called mr knoke requesting that he forward his power_of_attorney by letter dated date mr knoke forwarded the power_of_attorney and a settlement proposal by letter dated date appeals officer thurston responded to mr knoke's proposal setting forth additional terms and asking for clarification on a few points on date mr knoke sent appeals officer thurston a letter which stated i am in receipt of your letter of date i have spoken with the general_partner regarding your letter we will agree to all of the terms that you outlined in your letter please proceed with finalizing this case after receiving mr knoke's date letter appeals officer thurston began preparing the paperwork necessary to move the settlement forward from date until sometime in date appeals officer thurston aided by appeals coordinator spaulding worked on an appeals case memorandum and a tefra settlement offer package the package included completing form 870-p ad form_5402 appeals settlement memorandum form 4605-a and form 886-z c completing the settlement package was time consuming the amount of time it took to complete the settlement package was compounded by problems with the networked computer system and difficulties obtaining computer disks from the examination group that were necessary to complete the settlement package appeals officer thurston had to also organize appeals personnel to perform computations for each of the to limited partners on date appeals officer thurston spoke with mr knoke concerning how the settlement would work for those limited partners who sold their partnership interests between may and date appeals officer thurston completed the tefra settlement package on date appeals officer thurston submitted the case to her manager janet cole for approval on date the appeals_office forwarded a settlement package to the fsc the transmittal letter instructed the fsc to issue letters and agreement forms to the tlp partners on date the fsc mailed settlement letters to the limited partners after issuance of the settlement letters the internal_revenue_service irs waited for responses from the - - individual limited partners if an individual limited_partner chose to accept the settlement the settlement letter would go to the ogden service_center osc which in turn would send the letter to salt lake city for an associate chief to sign upon approval the letter would then be returned to the osc for processing and a copy would be sent to the appeals_office during date appeals officer thurston worked on preparing fpaa's for those limited partners who chose not to accept the settlement offer on date appeals officer thurston wrote an attachment to the fpaa package providing instruction to the osc on how to process the settlement offers on date appeals officer thurston and appeals_office manager cole signed and dated a form_5402 appeals transmittal_memorandum and supporting statement documenting the office of appeals' settlement offer and acknowledging that the offer had been made to the individual partners of tlp the form_5402 recommended issuance of an fpaa for each limited_partner who had not accepted the settlement by returning a signed form p ad on date respondent's appeals_office record section mailed the fpaa package to the osc ’ during date all of the fresno service_center work related to tefra partnerships including tlp was transferred to the ogden service_center - - on date respondent mailed an fpaa to petitioners james and janice geis a form 870-p ad was mailed to petitioners laurence and patricia jacobs on date but they did not sign the settlement letter until date the osc received the jacobses' settlement letter on date as of the date of the geises' letter finally determining that interest would not be abated the geises' total interest liability was dollar_figure and their assessed interest was dollar_figure for tax_year the geises have not made any payments of interest as of the date of the jacobses' letter finally determining that interest would not be abated the jacobses' total interest liability was dollar_figure for tax_year the jacobses made the following payments of interest which relate to the tlp issue dollar_figure on or around date dollar_figure on or around date and dollar_figure on or around date discussion pursuant to sec_6404 as it applies to the instant case the commissioner may abate part or all of an congress amended sec_6404 during to permit abatement of interest for any unreasonable error and delay in performing a ministerial or managerial act taxpayer bill of right sec_2 tbor publaw_104_168 and 110_stat_1452 that amendment however applies only to tax years beginning after date and therefore does continued - assessment of interest on any deficiency or payment of tax described in sec_6212 if either such deficiency was attributable to an error or delay by a service official in performing a ministerial_act or any error or delay in such payment is attributable to a service official's being erroneous or dilatory in performing a ministerial_act see sec_6404 a taxpayer can obtain relief only if no significant aspect of the error or delay can be attributed to the taxpayer involved see id sec_6404 is not intended to be routinely used 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 pincite c b vol s rept pincite c b vol the tax_court has jurisdiction to review for abuse_of_discretion the commissioner's failure to abate interest and may order an abatement see sec_6404 i the term ministerial_act means 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 review by supervisors have taken place sec_301_6404-2t b temporary continued not apply to the instant case see tbor sec_301 110_stat_1457 -- - proced admin regs fed reg date a decision concerning the proper application of federal tax law is not a ministerial_act see id we proceed to consider whether respondent's refusal to abate interest in the instant case was an abuse_of_discretion our analysis is segmented into the relevant time periods date through date date the date respondent mailed notices of beginning administrative proceedings to the individual limited partners of tlp is the point at which respondent first contacted petitioners in writing with respect to the deficiencies consequently date begins the period that may be taken into account pursuant to sec_6404 in deciding whether interest may be abated at trial agent mcbrien explained that between date and date agents dosil and mcbrien spent most of their time considering whether to allow the r d expense and whether to determine penalties he also testified that work on the tlp file proceeded at a steady pace as the final regulations under sec_6404 were issued on date the final regulations generally apply to interest accruing on deficiencies or payments of tax described in sec_6212 for tax years beginning after date see sec_301_6404-2 proced admin regs accordingly the final regulations are inapplicable to the instant case and sec_301_6404-2t temporary proceed admin regs fed reg date effective for taxable years beginning after date but before date does apply see sec_301_6404-2t c temporary proced admin regs supra -- - they spent time researching and interpreting the proper application of the law to the tlp case decisions concerning the proper application of federal tax law are not ministerial acts see sec_301_6404-2t b temporary proced admin regs supra because the actions of agents dosil and mcbrien in researching and interpreting the proper application of the law are not ministerial acts respondent's refusal to abate interest that accrued while they were taking those actions was not an abuse_of_discretion furthermore we note the failure of the tax_matters_partner and tlp's attorney timely to comply with respondent's requests for tlp business and legal documents and the limited partners' schedules k-1 petitioners argue that because respondent possessed all of the necessary schedules k-1 the noncompliant acts of the tax_matters_partner should not be the focus of the inguiry the reason agent mcbrien asked for the k-1s however was to expedite the examination process the failure to obtain all of the schedules k-1 for tlp and the time it took to obtain the other business and legal documents extended the time necessary to complete the audit and contributed significantly to any delay that occurred while the case was in examination accordingly for the period date through date we hold that it was not an abuse_of_discretion for respondent to refuse to abate interest date through date the evidentiary record for the period date through date is scant sometime after agent mcbrien's last meeting with tlp representatives during date but before date agent mcbrien forwarded the tlp case to respondent's quality review branch the exact date or even the approximate date that he forwarded the case to quality review is unknown because agent mcbrien concluded his last meeting with tlp's tax_matters_partner and its attorney during date it is reasonable to infer that the tlp case was not forwarded to quality review any earlier than date when agent lester was asked at trial about the handling of the tlp case while it was in quality review agent lester was not able to recall the case at all the first evidence in the record indicating that the tlp case was being considered by quality review was when quality review returned the case during date to agent mcbrien's examination group because of deficiencies in the case file and because quality review wanted him to reexamine his recommendation not to determine penalties agent mcbrien's examination group eventually resubmitted the tlp case to quality review during date nothing further about that period is contained in the record -- - of particular relevance to the instant case is sec_301_6404-2t b example temporary proced admin regs supra which provides the following a taxpayer invested in a tax_shelter and reported a loss from the tax_shelter on the taxpayer's income_tax return internal_revenue_service personnel conducted an extensive examination of the tax_shelter and the processing of the taxpayer's case was delayed during such examination because the period of limitations on assessment was about to expire the taxpayer executed a consent to extend the period of limitations the time required to process the taxpayer's case was not a result of a delay in performing a ministerial_act consequently interest attributable to this period cannot be abated example was neither incorporated into the final regulations nor cited by respondent in the instant case although it appears to be applicable to the instant case ’ tlp's tax_matters_partner and its attorney executed a form 872-o extending the period of limitations indefinitely although the form was never revoked or terminated for the duration of the examination_review and appeal of the tlp case we do not interpret example so broadly as to conclude that the parties' extension of the period of limitations means that respondent could not commit an error or delay in performing a ministerial_act during that period we conclude that even where an extension of the period of limitations is granted there may be instances where an error or delay by an officer_or_employee of the irs in performing a ministerial_act may present a see supra note circumstance where the commissioner's determination not to abate interest is an abuse_of_discretion when reviewing the commissioner's determination pursuant to sec_6404 our inguiry is a factual one and we proceed on a case-by-case basis see boyd v commissioner tcmemo_2000_ we employ an abuse_of_discretion standard in reviewing the commissioner's determination not to abate interest and we give the commissioner's determination due deference see 112_tc_19 the commissioner however does not have complete latitude the court will direct the commissioner to abate interest if the commissioner's exercise of discretion was arbitrary capricious or without sound basis in fact or law indeed the court held that the commissioner's discretion was abused in kincaid v commissioner tcmemo_1999_419 and douponce v commissioner tcmemo_1999_398 the final_determination letters in the instant case merely conclude we did not find any errors or delays that merit abatement of interest in our review of available records and other information for the period from to other than such cursory language there is nothing in either the final_determination letters or the testimony and other evidence that respondent offered at trial describing what respondent inquired into for the period date through date the results of that inquiry and the basis for - - respondent's determination not to abate interest there may simply be no record of what happened after the case was sent to quality review and no witness who can explain what happened on the other hand it is possible that respondent performed an inguiry yielding useful information but failed to offer that information to petitioners or to the court in any event except for the period date through date the period of time the tlp case was back with agent mcbrien's examination group we can only speculate as respondent does as to what happened with the tlp file during the period from date through date because sec_6404 provides for this court to review for abuse_of_discretion the commissioner's determination as to whether interest will be abated the court must decide how to proceed where the basis for the commissioner's determination has not been clearly explained either in the final_determination letters or at trial in 463_us_29 the supreme court stated that an agency must cogently explain why it has exercised its discretion in a given manner similarly in 802_f2d_843 6th cir citing 529_f2d_679 lst cir the court_of_appeals for the sixth circuit --- - stated that the agency's decision must be sufficiently clear so that a court is not required to speculate as to its basis see also 82_tc_989 quoting 360_f2d_715 2d cir a gency action would be an abuse_of_discretion 'if it were made without a rational explanation ' we are satisfied from the evidence adduced at trial that during the period date through date i1 e while the case was back with agent mcbrien's examination group respondent's actions were not ministerial however as to the period date through date excepting the period date through date respondent has failed to explain the rationale for respondent's determination not to abate interest the commissioner is in the best position to know what actions were taken by irs officers and employees during the period for which petitioners' abatement request was made and during any subsequent 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 discretion we would be condoning a review framework that would encourage the commissioner to provide as little information as possible about the handling of cases during the period of the abatement request and about the - inguiry in response to the request we do not believe that congress had that kind of review process in mind when it enacted sec_6404 and provided this court jurisdiction in sec_6404 1i to review for abuse_of_discretion the commissioner's determination not to abate interest accordingly because respondent has failed to explain clearly the basis for respondent's refusal to abate interest for the period date through date and the period date through date we hold that it was an abuse_of_discretion for respondent to refuse to abate interest for that period for the period date through date we uphold respondent's final_determination not to abate interest date through date from date through the mid-date there were no ministerial acts performed by respondent on date appeals officer thurston began her work resolving the disputed issues much of her early work with the tlp case depended upon the cooperation of tlp's representatives in scheduling meetings and phone conferences as well as providing her with a paper outlining tlp's position on the substantive issues most of the delay that occurred during that period of time was due to delay caused by mr reising his tardiness in completing tlp's position paper was the cause of significant delay accordingly - we uphold respondent's final_determination not to abate interest from date through mid-date by the time appeals officer thurston received tlp's position paper she was set to go to training for approximately weeks---from approximately mid-may through early date the case was not reassigned to another agent while appeals officer thurston was in training and no work was completed on the tlp case pursuant to sec_301_6404-2t b example temporary proced admin regs fed reg date however the decision not to reassign the case while appeals officer thurston was in training was not a ministerial_act accordingly from mid-may through early date the period of time appeals officer thurston was in training we uphold respondent's final_determination not to abate interest when appeals officer thurston returned from training she finished her response to mr reising's position paper by that time the focus of the appeal switched to how the individual partners would be treated discussions regarding the treatment of the individual limited partners continued until date eventually ending with the understanding that there would not be individual settlements for each of the limited partners because there were no delays caused by any ministerial acts of respondent's officers or employees from early july through - date we uphold respondent's final_determination not to abate interest for such period it is apparent from appeals officer thurston's date facsimile to mr reising stating she had put the tlp case on the back burner that she was working on non-tlp matters from date through date appeals officer thurston was able to work on more pressing matters because the tax_matters_partner and tlp's attorney executed a form extending the period of limitations indefinitely though not precisely on point sec_301_6404-2t b example temporary proced admin regs fed reg date implies that appeals officer thurston's decision to order her work affairs based on caseload priorities is not a ministerial_act consequently we uphold respondent's final_determination not to abate interest from date through date from date forward we are satisfied that respondent was working steadily on the tlp case to bring the matter to a close between april and date appeals officer thurston spent her time clarifying the settlement with tlp's new representative william knoke after date appeals officer thurston prepared the paperwork and performed other tasks necessary to bring the settlement to a close after the settlement letters containing forms 870-p ad were sent to - - the limited partners on date it was necessary to wait several months to see how many partners would accept the offer before respondent could send fpaa's to the limited partners who rejected the settlement at that point after the settlement letters were mailed the speed at which the matter was to be closed was up to the partners the geises never signed a form 870-p ad and respondent did not receive the jacobses' form p ad until date from may until date when respondent sent the fpaa's to petitioners appeals officer thurston prepared the documents to be included in the fpaa package on the basis of the foregoing we conclude that there were no errors or delays in the performance of ministerial acts by respondent's officers or employees during that period accordingly we uphold respondent's final_determination not to abate interest from date through date to reflect the foregoing decisions will be entered abating interest for the period of time stated herein


id office uilc cca_2010062816124170 number release date from ---------------------- sent monday date pm to --------------------- cc --------------- subject time for assessment of fica tax ------- --- in the case we discussed by telephone you will not be able to assess the employee share of the fica tax because the statute_of_limitations period had already expired at the time the decision document was entered the statute_of_limitations period under sec_6501 runs from the date of the employer's filing of form_941 the required return for fica tax under sec_6501 if the return of fica tax imposed by chapter is filed before april of the succeeding calendar_year it is considered filed on april of that year thus if the form sec_941 for periods ending in ------- and ------- were timely filed as i understand they were the three-year statute_of_limitations period for assessment of the tax ended before the decision document was entered -------------------------------------------------------------------------------------------------------------------------------------------- ------------------------