t c no united_states tax_court joseph paul freije petitioner v commissioner of internal revenue respondent docket no 932-02l filed date p timely petitioned for review under sec_6330 i r c of r's determination to proceed with levies to collect unpaid federal income taxes for and p claimed in his appeals hearing and herein that the proposed levy for should not be sustained because a remittance he made in with respect to his federal_income_tax liability for that year was instead applied improperly by r against a tax_liability alleged by r to exist for consequently p contends r is attempting to collect a tax that has been paid r contends that this court lacks jurisdiction to consider a year that was not the subject of a notice_of_determination to ascertain whether a liability existed for that year to which the remittance was applied held p's claim concerning the disposition of his remittance is a relevant issue relating to the unpaid tax for and we have jurisdiction to consider facts and issues arising in a year not the subject of the notice_of_determination insofar as they are relevant to computing the unpaid tax for held further since p's federal_income_tax return and payment for were untimely resulting in the assessment of additions to tax for late filing and payment r's application of p's remittance against the liability was proper in date p mailed a check to r for dollar_figure r posted the check to p's account for the erroneous amount of dollar_figure as dollar_figure exceeded all unpaid assessments for r issued p a refund for of dollar_figure in date after subsequently discovering his error r applied four of p's remittances totaling dollar_figure to p's account p claimed in his hearing request and herein that he had not received proper credit for all payments made with respect to held r's application of p's remittances to p's account to recoup the erroneous nonrebate refund for contravenes 49_f3d_340 7th cir these remittances should have been applied against unpaid taxes that are the subject of the instant levies consequently the levies must be reconsidered by r on remand p claimed in his appeals hearing and herein that the proposed levy for should not be sustained because r improperly changed the amounts shown as due on p's federal_income_tax return for r concedes that he disallowed pursuant to sec_6213 i r c certain miscellaneous_itemized_deductions claimed on that return and made an assessment based thereon without issuing a notice_of_deficiency to p as required by sec_6213 i r c as a consequence r contends p is entitled in the instant proceeding to de novo review under sec_6330 i r c of his entitlement to these deductions with any modifications resulting from the court's review to be reflected in the amount of the assessment and levy held the levy insofar as it is based on the disallowance of p's miscellaneous_itemized_deductions may not proceed as the assessment upon which it is based is invalid de novo review pursuant to sec_6330 i r c may not cure an assessment that is invalid for failure to comply with sec_6213 i r c consequently the levy must be reconsidered by r on remand held further other issues raised by respondent's determination to proceed with the levies for and determined joseph paul freije pro_se diane l worland for respondent gale judge pursuant to sec_6330 petitioner seeks review of respondent's determination to proceed with collection by levy of income_tax liabilities with respect to petitioner's and taxable years the issue for decision is whether respondent may proceed with proposed levies for liabilities not conceded by him for and findings_of_fact some of the facts have been stipulated and are so found the parties' stipulations and attached exhibits are incorporated herein by this reference petitioner resided in franklin indiana when the petition in this case was filed unless otherwise indicated all section references are to the internal_revenue_code_of_1986 as amended petitioner and his spouse mrs freije collectively the freijes obtained an automatic 4-month extension until date to file their joint federal_income_tax return for the taxable_year return the return untimely filed on date reported tax due of dollar_figure and was accompanied by a payment of dollar_figure which when added to the withholding credits listed of dollar_figure satisfied the tax reported as due nonetheless the untimely filing and payment triggered additions to tax for late filing and late payment as well as interest totaling dollar_figure which was assessed on date on date respondent received a dollar_figure remittance from the freijes the record does not disclose whether this remittance was designated for any purpose respondent applied dollar_figure of this remittance to the foregoing assessment for plus an additional_assessment of interest and refunded the our findings with respect to the freijes' taxable_year are based in part on ex 21-r a certified copy of a form_4340 certificate of assessments payments and other specified matters covering the freijes' individual income taxes for that year at trial we reserved ruling on the admissibility of the exhibit because of uncertainty concerning whether respondent's counsel had identified and provided a copy of it to petitioner at least days before trial as required by the court's standing_pretrial_order we allowed petitioner to make a submission after trial with respect to the admissibility of ex 21-r on the basis of petitioner's submission and the entire record in this case we conclude that petitioner has failed to show prejudice from any failure to receive a copy of ex 21-r at least days before trial we accordingly hereby admit ex 21-r balance to the freijes the freijes also made remittances to respondent of dollar_figure on date and dollar_figure on date that respondent treated as payments of estimated_tax for the freijes timely filed a joint federal_income_tax return for the taxable_year return reporting a tax due of dollar_figure listing withholding credits of dollar_figure and claiming estimated_tax payments of dollar_figure a payment of dollar_figure was sent with the return the dollar_figure in tax reported as due on the return as well as additions to tax for late payment and failure to pay estimated_tax plus interest were assessed on date subsequent remittances of dollar_figure each were credited against the freijes' liability on may and date on or about date petitioner mailed a check for dollar_figure to respondent this check was erroneously posted to the the figure of dollar_figure in claimed estimated_tax payments for apparently reflected the freijes' understanding that the three remittances they submitted to respondent during ie dollar_figure dollar_figure and dollar_figure for a total of dollar_figure constituted estimated_tax payments for that year however as noted respondent applied a portion of the initial dollar_figure remittance to the freijes' liability and refunded the balance consequently the total estimated_tax payments recorded in the freijes' account when their return was filed equaled dollar_figure ie the total of the latter two remittances not the dollar_figure reported on the return if respondent had not applied a portion of the freijes' remittance of dollar_figure to their liability the dollar_figure remittance of date would have resulted in total remittances for of dollar_figure or dollar_figure less than the tax continued freijes' account in the amount of dollar_figure on date which amount exceeded all assessments for as a consequence respondent issued the freijes a refund of dollar_figure on date at a time not disclosed in the record respondent corrected the dollar_figure error by reversing dollar_figure of the dollar_figure previously credited subsequent remittances made by the freijes in without designation for any year totaling dollar_figure were posted to their account as follows dollar_figure on date dollar_figure on date dollar_figure on date and dollar_figure on date the freijes timely filed a joint federal_income_tax return for the taxable_year return reporting a tax due of dollar_figure and no withholding credits or estimated_tax payments the freijes' actual withholding credits for were dollar_figure a payment of dollar_figure was sent with the return subsequent remittances of dollar_figure and dollar_figure were credited against their liability on april and date respectively continued reported as due on the return while this reversing entry is dated date on the freijes' form_4340 certificate of assessments payments and other specified matters for we conclude that it did not occur on that date as the refund triggered by the erroneous posting of this amount was issued almost month later we are persuaded that respondent did not become aware of the error until sometime after this refund was issued to the freijes the freijes timely filed a joint federal_income_tax return for the taxable_year return reporting a tax due of dollar_figure listing withholding credits of dollar_figure and claiming estimated_tax payments of dollar_figure on or about date respondent issued a notice to the freijes at the address they entered on the return concerning the return and entitled we changed your estimated_tax total--you have an amount due the notice indicated that the return had been changed as follows i taxable_income had been increased from the dollar_figure reported to dollar_figure resulting in an increase in the tax shown as due on the return from dollar_figure to dollar_figure and ii estimated_tax payments had been reduced from the dollar_figure reported to dollar_figure on the same date as the notice respondent assessed the increased tax of dollar_figure without issuing a statutory_notice_of_deficiency to the freijes on date respondent sent a letter to the freijes with attached workpapers that explained in greater detail the foregoing changes made to the return with respect to the reduction in the claimed estimated_tax payments the letter advised that the freijes' account showed estimated_tax payments of only dollar_figure consisting of two payments of dollar_figure on according to the forms in the record the total remittances made by the freijes during exclusive of the dollar_figure payment submitted with the return were dollar_figure insofar as the record discloses these remittances were not designated by the freijes for any taxable_year november and date with respect to the increase in taxable_income the letter advised that the dollar_figure increase in taxable_income from the reported dollar_figure to dollar_figure consisted of the following items i a dollar_figure increase in income as a result of a discrepancy in that amount between the figure entered for adjusted_gross_income at the bottom of the first page of the return dollar_figure and the figure entered for adjusted_gross_income at the top of the second page dollar_figure ii a dollar_figure increase in income resulting from the disallowance of a casualty or theft_loss in that amount claimed on the return on the grounds that the claimed loss did not consider the limitation of such losses to amounts in excess of percent of adjusted_gross_income iii a dollar_figure increase in income resulting from the disallowance of a miscellaneous deduction for p o box claimed on the return explained in the letter as follows misc deductions a post office box is not a deductible expense iv a dollar_figure increase in income resulting from the disallowance of a miscellaneous deduction for lawyers claimed on the return explained in the letter as follows other misc deductions lawyers are not a deductible expense they are deductible if the fees are paid to produce or collect taxable_income or are in connection with the determination collection or refund of a tax on date respondent issued to the freijes a final notice_of_intent_to_levy and notice of your right to a hearing for income_tax interest and penalties for taxable years as noted the forms in the record state that the freijes made remittances during that totaled dollar_figure however respondent applied dollar_figure and dollar_figure against the freijes' and liabilities respectively and on date respondent received a form request for a collection_due_process_hearing from petitioner but not mrs freije regarding respondent's proposed collection action for the foregoing years as grounds for disagreeing with the proposed collection action petitioner wrote as follows i am scheduled for audit in greenwood in you people have falsely accused me of writing a bad_check for dollar_figure you deny receiving over dollar_figure in estimated_taxes i have amended you owe me over dollar_figure on date the freijes filed an amended federal_income_tax return for claiming an increase in itemized_deductions of dollar_figure and a resulting refund of dollar_figure on date the freijes filed amended federal_income_tax returns for and claiming a dollar_figure reduction in previously reported adjusted_gross_income for each of those years and resulting refunds of dollar_figure and dollar_figure respectivelydollar_figure this figure equaled the portion of an increase in the freijes' income for that had been proposed in an examination of the return with which petitioner disagreed these figures were likewise designed to offset the same proposed examination increase in the freijes' income for with which petitioner disagreed see supra note the and amended returns both claimed amounts for estimated_tax payments that were different from the amounts claimed in the original returns for those years on or about date an appeals officer of respondent sent petitioner a letter advising him that a conference would be scheduled in the future in date petitioner advised the appeals officer that he did not wish to appear in person in respondent's office to attend a face-to-face meeting in connection with a hearing on date petitioner and the appeals officer discussed petitioner's request by telephone during that conversation petitioner advised the appeals officer that he would be willing to pay cents per year for and call it even and then start afresh with the year the appeals officer advised petitioner that this proposed collection alternative to the levy was not acceptable later that day petitioner left voice-mail messages for the appeals officer seeking information concerning changes respondent made to his and returns that resulted in additional tax additions to tax and interest for those years as well as information concerning why payments intended for one year had been applied to other years petitioner further advised the appeals officer that his problems began with his taxes in addition petitioner advised the appeals officer of petitioner's claim that respondent had altered petitioner's check for dollar_figure intended as payment of his taxes so that it was posted for dollar_figure which according to petitioner resulted in his being falsely accused by respondent of writing a bad_check for dollar_figure on date a notice_of_determination concerning collection action s under sec_6320 and or was sent to petitioner in the notice the appeals officer determined that all applicable laws and administrative procedures had been satisfied with respect to petitioner's expressed concerns about his taxes the appeals officer explained that a remittance submitted by petitioner in and intended by him to be applied to that year's taxes was instead applied to taxes because the return and payment for had been received late triggering an assessment of additions to tax and interest for that year to which the payment had been applied with respect to the appeals officer determined that because respondent's incorrect posting of petitioner's dollar_figure check as dollar_figure had resulted in an erroneous refund with respect to the assessed failure to pay addition_to_tax would be abated as for the remaining liabilities that were the subject of the levy the appeals officer determined the tax owed is from the original return for and therefore i recommend the government sustain the tax_liability for those tax periods concluding that the proposed levy represented an appropriate balancing of the need for efficient collection with the concern that the collection action be no more intrusive than necessary the appeals officer determined that the proposed levy could proceed on date petitioner filed a timely petition with this court for review of the determination the petition assigns a litany of errors to the determination including i that respondent changed petitioner's through returns without notifying him ii that respondent altered a check petitioner submitted in connection with the erroneous posting of his dollar_figure payment as dollar_figure for and iii that respondent denied receipt of certain payments petitioner made petitioner seeks as a remedy a refund of all federal income taxes he paid for taxable years through after the petition was filed on date respondent issued a notice_of_deficiency to the freijes with respect to their taxable_year in the notice_of_deficiency respondent determined inter alia that the freijes were not entitled to the dollar_figure casualty_loss claimed in the return but were entitled to miscellaneous deductions of dollar_figure subject_to the 2-percent limitation of sec_67 on the same day that the notice_of_deficiency was issued respondent issued a claim disallowance letter to the freijes denying their claims for refund in their amended returns filed for and no petition was filed in this court with respect to the notice_of_deficiency for at trial and in his posttrial brief respondent conceded that collection of petitioner's outstanding liability for representing that portion of the erroneous refund for that had not been collected was prohibited by sec_6532 opinion sec_6331 authorizes the secretary to levy upon property and property rights of a taxpayer liable for taxes who fails to pay those taxes within days after notice_and_demand for payment is made sec_6331 provides that the levy authorized in sec_6331 may be made with respect to any unpaid tax only if the secretary has given written notice to the taxpayer days before the levy sec_6330 requires the secretary to send a written notice to the taxpayer of the amount of the unpaid tax and of the taxpayer's right to a sec_6330 hearing at least days before any levy is begun this notice need only be given once for the taxable_period to which the unpaid tax specified in the levy notice relates sec_6330 if a sec_6330 hearing is requested the hearing is to be conducted by appeals and at the hearing the appeals officer conducting it must verify that the requirements of any applicable law or administrative procedure have been met sec_6330 c the taxpayer is entitled to one hearing with respect to the taxable_period to which the unpaid tax specified in the levy notice relates sec_6330 the taxpayer may raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy sec_6330 the taxpayer may also raise challenges to the existence or amount of the underlying tax_liability at a hearing if the taxpayer did not receive a statutory_notice_of_deficiency with respect to the underlying tax_liability or did not otherwise have an opportunity to dispute that liability sec_6330 the underlying tax_liability that may be challenged includes amounts reported as due on a return 122_tc_1 at the conclusion of the hearing the appeals officer must determine whether and how to proceed with collection and shall take into account i the verification that the requirements of any applicable law or administrative procedure have been met ii the relevant issues raised by the taxpayer iii challenges to the underlying tax_liability by the taxpayer where permitted and iv whether any proposed collection action balances the need for the efficient collection_of_taxes with the legitimate concern of the taxpayer that the collection action be no more intrusive than necessary sec_6330 we have jurisdiction to review the appeals officer's determination where we have jurisdiction over the type of tax involved in the case sec_6330 see 122_tc_287 generally we may consider only those issues that the taxpayer raised during the sec_6330 hearing see sec_301_6330-1 q a-f5 proced admin regs see also 118_tc_488 where the underlying tax_liability is properly at issue we review the determination de novo e g 114_tc_176 where the underlying tax_liability is not at issue we review the determination for abuse_of_discretion id pincite whether an abuse_of_discretion has occurred depends upon whether the exercise of discretion is without sound basis in fact or law see 104_tc_367 petitioner proceeding pro_se seeks a refund of all income taxes paid for taxable years through our jurisdiction in this case is confined however to a review of the appeals officer's determination approving a levy to collect unpaid tax_liabilities for and we shall treat petitioner as contesting the appeals officer's determination for all years and consider his arguments to the extent they have any bearing thereon in particular we find that petitioner's communications with the appeals officer may be fairly construed as proposing a collection alternative and as raising the issue that payments he made with respect to the years in issue were not properly accounted for by respondent and that the tax reported as due on his returns for some or all of the years in issue was changed inappropriately by respondentdollar_figure proposed collection alternative we can readily dispose_of petitioner's proposed collection alternative his offer of cents per year for and is frivolous and the appeals officer's rejection of it was not an abuse_of_discretion although respondent now concedes he may not collect the unpaid balance of petitioner's liability by levy we nonetheless find it necessary to consider that year because first petitioner claims that payments that were intended to satisfy his liability were instead applied to if these payments were improperly applied to then respondent's computation and assessment of the additions to tax for late payment and failure to pay estimated_tax for would be we shall also assume without deciding that by mentioning his amended returns for and in his request for a hearing petitioner thereby raised challenges at the hearing to the underlying tax_liabilities as originally reported in the and returns regardless of whether these issues are treated as having been raised there is no effect on the outcome because the challenges as discussed infra have no merit while petitioner also mentioned his amended_return for in his hearing request we conclude that any issue thereby raised is moot as a result of respondent's concession that the levy for should not proceed incorrectdollar_figure second respondent applied dollar_figure of remittances made by the freijes in to their liability even though all assessments of the liability were extinguished by respondent's crediting of petitioner's dollar_figure check as dollar_figure on date although neither party has addressed the issue as discussed more fully below respondent's application of the freijes' remittances to their account contravenes 49_f3d_340 7th cir claim of payment with respect to petitioner's contention that certain payments were improperly applied to respondent argues that we lack jurisdiction to consider citing lister v commissioner tcmemo_2003_17 we disagree we held in lister a memorandum opinion that our jurisdiction under sec_6330 was confined to the years that were the subject of the notice_of_determination where the taxpayer had attempted in the had the freijes' date remittance of dollar_figure which was undesignated insofar as the record discloses not been applied in part against their liability we assume respondent would have treated it as a payment of estimated_tax for as he did with respect to the freijes' dollar_figure remittance made week later on date and their dollar_figure remittance made on date there is evidence that the freijes intended all of the foregoing remittances to be payments of estimated_tax for in that they reported in the return the total of these three remittances dollar_figure as the amount of estimated_tax paid on this record given the freijes’ myriad remittances we are unable to conclude that a change in the unpaid liability for would have had no impact on the computation of any additions to tax for untimely payment in and petition to put in issue all years subsequent to the years covered by the notice here petitioner's claim is that a payment intended for a year that was a subject of the notice_of_determination determination_year was instead applied to a liability for a year that was not a subject of the notice_of_determination nondetermination year we do not read lister as precluding our consideration of facts and issues arising in nondetermination years where those facts and issues are relevant to a taxpayer's claim that the tax which is the subject of a collection action has been paid as discussed below we believe our jurisdiction extends in appropriate circumstances to years other than those in which the tax_liability sought to be collected arises our jurisdiction under sec_6330 covers the determination of the appeals officer who conducted the hearing requested under that section see sec_6330 the tax_court shall have jurisdiction with respect to the determination of an appeals officer under sec_6330 sec_6330 prescribes the matters that the appeals officer's determination shall take into consideration which include the issues raised under paragraph of sec_6330 paragraph of sec_6330 entitles the person upon whose property the commissioner seeks to levy the taxpayer to raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy par a and if he did not receive any statutory_notice_of_deficiency for or otherwise have an opportunity to dispute the underlying tax_liability he may also raise challenges to the existence or amount of the underlying tax_liability for any_tax period par b thus our jurisdiction is defined by the scope of the determination which must take into consideration if raised by the taxpayer any relevant issue relating to the unpaid tax or the proposed levy and in certain circumstances challenges to the existence or amount of the underlying tax_liability for any_tax period there is no question that petitioner raised the issue of a remittance made in having been applied improperly in petitioner's view to satisfy a liability as the determination discusses his claim and traces the application of the remittancedollar_figure the question is whether the propriety of applying the remittance to satisfy the liability is a relevant issue relating to the unpaid tax or the proposed levy if so we have jurisdiction as the statute required the determination to take into consideration the issue and our jurisdiction encompasses the determination for the reasons discussed below we conclude our jurisdiction is not confined to there is also no dispute that the freijes made the claimed remittance of dollar_figure on or about date as the form_4340 for records a payment in that amount on that date the year or period to which the unpaid tax relates as respondent contends but extends to facts and issues in nondetermination years where they are relevant to computing the unpaid tax in interpreting the scope of sec_6330 we note first that the legislative_history indicates that congress intended a broad construction of the issues that a taxpayer was entitled to raise under that section in general any issue that is relevant to the appropriateness of the proposed collection against the taxpayer can be raised at the pre-levy hearing h conf rept pincite 1998_3_cb_747 second considering the terms of the statute in their ordinary meaning a relevant issue relating to the unpaid tax or the proposed levy surely includes a claim such as the one here that the unpaid tax has in fact been satisfied by a remittance that the commissioner improperly applied elsewhere both sec_6331 which empowers the commissioner to impose a levy and sec_6330 which requires the commissioner to afford a hearing before proceeding with a levy and provides our jurisdiction to review his determination to proceed with a levy contemplate an unpaid tax sec_6330 a b and c a d emphasis added since an unpaid tax is the sine qua non of the commissioner's authority to levy we believe a claim directed at the status of the tax as unpaid is a relevant issue relating to the unpaid tax or the proposed levy sec_6330 meaningful review of a claim that a tax sought to be collected by levy has been paid_by means of a remittance or an available credit will typically require consideration of facts and issues in nondetermination years as those years may constitute the years to which a remittance was applied or from which a credit originateddollar_figure finally we note that notwithstanding respondent's present position the appeals officer interpreted the statute to require her consideration of petitioner's claim that certain remittances intended for had been applied improperly to the determination specifically addresses this claim and traces the application of the freijes' date remittance to an indeed we have routinely considered facts and issues in nondetermination years in these circumstances see eg 116_tc_60 untimely claim for application of overpayments from nondetermination years leineweber v commissioner tcmemo_2004_17 claim that overpayment in determination_year was applied to nondetermination year for which period of limitation on collection had expired tedokon v commissioner tcmemo_2002_308 same as landry lee v commissioner tcmemo_2002_233 same as landry affd 70_fedappx_471 9th cir kazunas v commissioner tcmemo_2002_188 existence of overpayment in nondetermination year sponberg v commissioner tcmemo_2002_177 claim that commissioner had not accounted for all payments in nondetermination years which if accounted for would result in overpayments available for application to determination years apparently no issue was raised in the foregoing cases concerning our jurisdiction to consider facts and issues arising in nondetermination years outstanding liability for representing an assessment for failure_to_file and failure to pay additions to tax as well as interest for the foregoing reasons we hold that our jurisdiction under sec_6330 encompasses consideration of facts and issues in nondetermination years where the facts and issues are relevant in evaluating a claim that an unpaid tax has been paid in reaching this conclusion we are mindful that in the case of our deficiency jurisdiction sec_6214 imposes limitations on our jurisdiction with respect to years other than the year for which a deficiency has been determined sec_6214 provides that in redetermining a deficiency of income_tax for any taxable_year this court shall consider such facts with relation to the taxes for other years as may be necessary correctly to redetermine the amount of such deficiency but in so doing shall have no jurisdiction to determine whether or not the tax for any other year has been overpaid or underpaid in interpreting this provision-- we have distinguished our authority under sec_6214 to compute a tax for a year not before the court from our lack of authority under that same section to determine a tax for such year in 61_tc_436 affd without published opinion 510_f2d_970 3d cir we stated that sec_6214 does not prevent us from computing as distinguished from 'determining' the correct_tax liability for a year not in issue when such a computation is necessary to a determination of the correct_tax liability for a year that has been placed in issue 95_tc_437 thus sec_6214 does not foreclose our authority i to consider facts and issues in a nondeficiency year and on the basis thereof compute the tax_liability for that year regardless of the tax_liability reported by the taxpayer or assessed by the commissioner or ii to employ the recomputed tax_liability in redetermining the tax_liability for the year for which a deficiency was determined the limiting conditions of sec_6214 are that the computation of the other year's tax_liability be necessary to the redetermination of the tax_liability at issue and that our recomputation not constitute a determination of the other year's liability for any other purpose there is no statutory provision comparable to sec_6214 that limits the jurisdiction granted by sec_6330 nonetheless our holding conforms to the principles of sec_6214 we conclude that our jurisdiction under sec_6330 extends to the consideration of facts and issues in a nondetermination year only insofar as the tax_liability for that year may affect the appropriateness of the collection action for the determination_year in exercising that jurisdiction we do not determine whether any collection action with respect to the nondetermination year may proceed but only whether collection action may proceed in the determination_year having decided our jurisdiction to consider facts and issues in we turn to consideration of petitioner's claim that his liability had been paid in an effort to demonstrate that respondent had not properly credited him with payments he made to satisfy his liabilities petitioner testified that he had timely filed his return if the return had been timely filed then the dollar_figure payment submitted with that return when added to withholding credits would have fully satisfied the tax reported as due on the return and no additions to tax for late filing or late payment would have been owed as a consequence it would not have been proper for respondent to apply as he did a portion of the dollar_figure payment received from the freijes on date against any liability as there would have been none however we have found that the return was untimely filed on date we based that finding on an evaluation of the parties' respective evidence respondent offered from his records a certified copy of a completed form_1040 u s individual_income_tax_return for bearing the freijes' signatures with a received stamp of date and with a date of entered next to the signatures the form_4340 for likewise indicates a filing_date for the return of date petitioner offered a form_1040 with a date of entered next to the signatures in addition petitioner offered a copy of his check to the irs bearing a date of this copy had no bank markings indicating it had been negotiated which petitioner explained was due to the fact that it was a copy of the check made before mailing it to the irs petitioner also produced a copy of the negotiated version of the same check yet this copy bore a date of consistent with a date filingdollar_figure moreover petitioner produced a copy of a request for an automatic 4-month extension of time for filing the as to the discrepancy in the and dates on the two copies of the same check he wrote as payment of his taxes petitioner testified that the check bore the date when he mailed it to respondent which implies that someone at the irs altered the check by adding the numeral to the month indicator in the date this claim arouses greater suspicion when considered in light of the fact that petitioner is also claiming that someone at the irs altered the numeral on another of his checks namely the check for dollar_figure intended as payment towards his taxes that was erroneously posted by respondent as a payment of dollar_figure that check is also in evidence and contains inconsistent entries designating its amount namely a numeric entry of dollar_figure sic and a written entry of one thousand seven hundred seventy six dollars the recurrent manipulation of the numeral on petitioner's checks undermines the credibility of both his claims that irs personnel altered his checks we need not resolve the dispute concerning the dollar_figure check however given respondent's concession that his effort to recover the erroneous refund resulting from the incorrect posting of this check is barred by sec_6532 nonetheless one is left with the singular sensation that petitioner's recurrent problems with the numeral are too similar to be explained by malfeasance on the part of irs employees return with the signatures thereon dated date the form_4340 for indicates that a 4-month extension was granted yet petitioner offers no convincing explanation why if he filed a return for in date as he claims he sought a filing extension in date given the significant contradictory evidence petitioner's self-serving claim that he filed a return for in date16 is not credible because petitioner's return and accompanying payment were untimely respondent assessed additions to tax for late filing and late payment for that year as a consequence respondent was entitled to apply the date payment submitted by the freijes which it has not been shown was designated for any year in satisfaction of his liability see revrul_73_305 1973_2_cb_43 therefore respondent's assessment of the additions to tax for late payment and failure to pay estimated_tax for was correct respondent's application of remittances to liabilities on or about date petitioner mailed a check for dollar_figure to respondent this check was erroneously posted to the petitioner also claims that he filed a return for in date and offered into evidence a purported copy of that return which respondent has no record of receiving in light of the greater weight of the evidence discussed above that he filed the return in date we are likewise unpersuaded that petitioner filed in date freijes' account in the amount of dollar_figure on date as this amount exceeded all unpaid assessments for respondent issued the freijes a refund of dollar_figure for that year on date sometime after date respondent became aware of the dollar_figure error and made reversing entries on the freijes' accountdollar_figure however no assessments were recorded subsequent to the date refund respondent thereafter applied four remittances made by the freijes in totaling dollar_figure to their account respondent's application of these remittances to the freijes' account in an effort to recover the erroneous refund contravenes 49_f3d_340 7th cir in o'bryant the court_of_appeals for the seventh circuit to which an appeal in this case would ordinarily lie held that the commissioner may not use his postassessment collection powers to recover an erroneous nonrebate refund in that case the taxpayer made a payment that satisfied an outstanding assessment the commissioner mistakenly credited the payment to the taxpayer's account twice and consequently issued the taxpayer a refund in the amount of the payment plus interest upon discovering his mistake the commissioner recovered a portion of the refund by levy and by applying overpayments and the reversing entries were dated as of the original erroneous posting date see supra note remittances from other years to the taxpayer's account for the year of the refund without having made another assessment the court_of_appeals concluded that since the assessment had been extinguished by the taxpayer's payment the commissioner could not employ his summary collection powers in the absence of an assessment but instead had to recover the erroneous refund through an erroneous refund action under section dollar_figure respondent has applied dollar_figure in remittances to the freijes' account in an effort to recover the erroneously refunded dollar_figure plus interest presumably under o'bryant he may not do so instead these undesignated remittances under respondent's then-applicable procedures see revrul_73_ supra should have been applied to satisfy outstanding assessments for had the assessments been thereby satisfied presumably some portion of these remittances would have been available for application to the freijes' account consequently we conclude that the levies for and should not be sustained in their present form as the unpaid tax for each year may be affected by the proper application of the dollar_figure in remittances by the freijes the court_of_appeals declined to decide whether as the commissioner contended he had a further option of recovering the refund through a suit begun within the limitations_period of sec_6501 without regard to sec_7405 - - respondent has conceded that the appeals officer's determination to proceed with the levy with respect to petitioner's liability failed to take into account dollar_figure of withholding credits of mrs freije that were not listed on the return the only specific dispute of his liability that we can identify as having been raised by petitioner arises by virtue of the freijes' amended_return for dollar_figure in the amended_return the freijes claimed a reduction in adjusted_gross_income of dollar_figure which was calculated as reducing the tax due from the dollar_figure originally reported to dollar_figuredollar_figure while petitioner may dispute in this proceeding the amount reported as due on the return see 122_tc_1 there is no merit to the grounds on which petitioner now disputes the amount reported as due on the return petitioner testified that he claimed a dollar_figure reduction in adjusted_gross_income on the amended_return for because this was an amount by which an agent of respondent upon examination of the return see supra note because the freijes claimed for the first time in the amended_return for that they were entitled to credits for withholding and estimated_taxes of dollar_figure and dollar_figure respectively the refund claimed in the amended_return was dollar_figure an amount exceeding the difference between the tax reported as due on the original versus the amended_return proposed to increase the freijes' adjusted_gross_income for without more we see no merit in petitioner's challenge to the underlying liability for the appeals officer's determination to proceed with the levy has not taken into account however the dollar_figure in withholding credits of mrs freije to which respondent concedes the freijes are entitled or the dollar_figure in remittances that were improperly applied to the freijes' account given these infirmities the determination that the levy for could proceed without modification was an abuse_of_discretion the unpaid tax for that is sought to be collected by the levy at issue includes an assessment of tax of dollar_figure as well as an estimated_tax addition_to_tax and interest that respondent made on date for the reasons outlined below we conclude that a portion of this assessment is invalid the freijes reported a tax due of dollar_figure on the return timely filed on date however on date pursuant to what respondent concedes was a so-called math error notice under sec_6213 respondent adjusted various items reported on the return resulting in an increase in the reported tax to dollar_figure which was assessed on the same date sec_6213 in general allows the assessment of tax in excess of that shown on a return ie without resort to the deficiency procedures of sections in cases where the additional_amount of tax is attributable to a mathematical_or_clerical_error appearing on the return sec_6213 defines mathematical_or_clerical_error for this purpose generally as an error in addition subtraction multiplication or division shown on a return an incorrect use of an irs table if apparent from the existence of other information on a return an item entry on a return which is inconsistent with another entry of the same or another item on the return an omission of information which is required to be supplied on a return to substantiate an entry an entry on a return of a deduction in an amount which exceeds a statutory limit if the items entering into the computation of the limit appear on the return and various other instances not pertinent here see sec_6213 a - m as noted in our findings_of_fact respondent's math error adjustments to the return included a correction of inconsistent entries for adjusted_gross_income and of a casualty_loss claimed without regard to the limitation of such losses to amounts exceeding percent of adjusted_gross_income we have no quarrel with these adjustments as they fall squarely within the provisions of sec_6213dollar_figure see sec_6213 e however respondent also purported to disallow pursuant to sec_6213 an other miscellaneous deduction ie a miscellaneous deduction not subject_to the 2-percent limitation of sec_67 of dollar_figure claimed on schedule a itemized_deductions of the return for lawyers and a miscellaneous deduction ie one subject_to the 2-percent limitation of dollar_figure claimed on the schedule a for a p o box in the instant proceeding respondent does not attempt to defend the foregoing disallowances as a permissible application of sec_6213dollar_figure instead respondent takes the position that because the miscellaneous deductions were disallowed pursuant to a math error notice under sec_6213 without the issuance of a notice_of_deficiency petitioner did not have any previous opportunity to dispute the underlying tax_liability within the meaning of sec_6330 thus respondent reasons petitioner is entitled to dispute the underlying tax_liability associated with the disallowed the math error notice also indicated that the freijes' estimated_tax payments for totaled dollar_figure rather than the dollar_figure claimed on the return as previously noted additional remittances totaling dollar_figure and dollar_figure made by the freijes in but undesignated were applied to their and liabilities respectively the record does not disclose whether petitioner sought an abatement under sec_6213 of the assessment made by respondent pursuant to sec_6213 deductions in the present sec_6330 proceeding and we are urged to undertake de novo review under sec_6330 of petitioner's entitlement to those deductions in respondent's view such de novo review should result in petitioner's liability's being adjusted to reflect an allowance of dollar_figure of the claimed miscellaneous deduction for legal fees the amount that respondent concedes petitioner has substantiated in this proceeding reduced pursuant to sec_67 by an amount equal to percent of adjusted_gross_income petitioner contends that he has substantiated the full dollar_figure deduction claimed on the return and that in connection with the examination of his return respondent's agent allowed his claimed deduction for legal fees the notice_of_deficiency for issued after the notice_of_intent_to_levy for that year provides some corroboration for petitioner's claim in that it allowed dollar_figure in miscellaneous deductions subject_to the 2-percent limitation without further specifying the basis for the allowancedollar_figure as to any possible discrepancy in respondent's treatment of the legal fees deduction in the instant proceeding and his treatment in the notice_of_deficiency and any consequent inconsistency in the assessment that respondent became entitled to make when the freijes defaulted with respect to the as noted no petition was filed in response to the notice_of_deficiency for notice of deficiency24 respondent takes the position on brief that we should undertake a de novo determination of petitioner's entitlement to the claimed deduction for legal fees pursuant to sec_6330 and that any such determination will generally be binding on the parties in any subsequent litigation under the doctrine_of collateral_estoppel accordingly respondent represents respondent will make any necessary adjustments to the liability to conform to our decision we reject respondent's contention that we should undertake de novo review of petitioner's entitlement to the miscellaneous deductions claimed the assessment of the liability made pursuant to the math error notice which the levy at issue in this proceeding seeks to collect is simply invalid insofar as it results from the disallowance of petitioner's miscellaneous deductions claimed on the return that portion of the assessment violated sec_6213 which generally prohibits the assessment of a deficiency without affording the taxpayer the opportunity to petition for redetermination of the deficiency in the record does not disclose whether an assessment was made after the freijes failed to file a petition with respect to the notice_of_deficiency for the form_4340 covering that is in the record was generated before the issuance of the notice_of_deficiency however respondent's counsel represents on brief that petitioner has a liability for that is based on the notice_of_deficiency as distinguished from the liability based on the math error notice this courtdollar_figure cf israel v commissioner tcmemo_2003_198 affd 88_fedappx_941 7th cir in our view respondent's failure to show that the disallowance of the miscellaneous deductions fell within the math error exception or some other exception to the proscription of sec_6213 on assessments without deficiency procedures is fatal to that portion of the math error assessment that is based on the disallowance of the miscellaneous deductions respondent in effect seeks to cure the defect in the math error assessment by conceding petitioner the opportunity to dispute the disallowance in this proceeding while it is true that sec_6330 provides that a taxpayer whose property is the subject of a proposed levy may dispute the underlying tax_liability if he did not receive any statutory_notice_of_deficiency for such tax_liability or did not otherwise have an opportunity to dispute such tax_liability that provision should not be construed to allow respondent to employ sec_6213 provides in part except as otherwise provided in the case of certain termination or jeopardy assessments no assessment of a deficiency in respect of any_tax imposed by subtitle a and no levy or proceeding in court for its collection shall be made begun or prosecuted until a notice_of_deficiency has been mailed to the taxpayer nor until the expiration of such 90-day or 150-day period in which the taxpayer may petition the tax_court for redetermination of the deficiency it to perfect an assessment made in derogation of sec_6213 we have previously construed the phrase did not receive any statutory_notice_of_deficiency as used in sec_6330 as encompassing the situation where a notice_of_deficiency though mailed by the commissioner was not in fact received by the taxpayer see calderone v commissioner tcmemo_2004_240 tatum v commissioner tcmemo_2003_115 respondent would have us extend the meaning of that phrase to encompass the situation where a taxpayer did not receive any notice_of_deficiency because the commissioner failed to issue one in violation of sec_6213 we decline to do so such an interpretation would contravene the intent underlying sec_6330 a measure intended to expand taxpayers' rights in collection actions see s rept pincite 1998_3_cb_537 under the interpretation of sec_6330 urged by respondent de novo review in a sec_6330 proceeding could substitute for the taxpayer's right to a deficiency proceeding under sections a taxpayer's rights in the former proceeding are more circumscribed than in the latterdollar_figure moreover such a construction for example a taxpayer must petition this court for review within days of a determination under sec_6330 see sec_6330 whereas he ha sec_90 days or if outside the united_states days to petition with respect to a notice_of_deficiency see sec_6213 see also 117_tc_122 no expanded filing period under sec_6330 continued would conflict with other provisions of sec_6330 sec_6330 and requires in connection with the hearing provided under sec_6330 that the appeals officer obtain verification that the requirements of any applicable law or administrative procedure have been met and that he take such verification into account in determining whether the levy should proceed one requirement of applicable law is the mandate of sec_6213 that except in certain cases including those involving termination or jeopardy assessments an opportunity for preassessment judicial review precede the assessment or collection of any deficiency generally defined to encompass income_tax in excess of the amount reported on a return thus the requirement of sec_6330 that the appeals officer verify compliance with applicable law cannot be reconciled with an interpretation of sec_6330 that allows the commissioner to avoid compliance with sec_6213 we accordingly hold that petitioner's opportunity in a sec_6330 proceeding to dispute the underlying tax_liability does not cure an assessment made in derogation of his right under sec_6213 to a deficiency proceeding as a consequence the determination to proceed with collection of that portion of the math error assessment based on continued for notices of determination addressed to persons outside the united_states the disallowance of the freijes' miscellaneous deductions was error as a matter of law and accordingly an abuse_of_discretion the appeals officer's verification that the requirements of applicable law had been met was incorrect the statement in the notice_of_determination that the tax owed for is from the original return is wrong it overlooks the adjustments to the return improperly claimed as math errors under sec_6213 accordingly the levy to collect the foregoing portion of the assessment may not proceed conclusion respondent has conceded that the determination to proceed with the levy for should not be sustained and that the determination to proceed with the levy for failed to take into account dollar_figure in withholding credits with respect to the levies for and we have found that dollar_figure in remittances made by the freijes in were unlawfully applied to their account and should have been available to satisfy liabilities for and or dollar_figure thus the unpaid tax for those years upon which the levies are based may not be correct further we have found that a portion of the assessment on which the levy for is based is invalid if the dollar_figure in remittances that was applied to the account is applied to the account the result may be that the dollar_figure in remittances that was applied to may be available to satisfy liabilities given the various infirmities in the proposed levies for and which demonstrate that the determination to proceed with the and levies in full was an abuse_of_discretion we shall remand the determination for those years to the office of appeals for reconsideration to reflect the foregoing an appropriate order will be issued


t c memo united_states tax_court thomas e and donienne c larkin petitioners v commissioner of internal revenue respondent docket no filed date thomas e and donienne c larkin pro_se wesley c pierce specially recognized for petitioners jeffery d rice for respondent 1at trial the court received an entry of appearance for petitioners by wesley c pierce and allowed him to try the case later the court determined he was not admitted to the tax_court bar thus we specially recognize mr pierce memorandum opinion goeke judge respondent denied the larkins’ claim_for_abatement of interest pursuant to sec_6404 the interest in dispute arises from a income_tax deficiency of dollar_figure and an addition_to_tax under sec_6653 the issue for decision is whether respondent’s determination not to abate interest was an abuse_of_discretion we hold that it was not background some of the facts have been stipulated and the stipulated facts and accompanying exhibits are incorporated herein by this reference at the time they filed their petition the larkins resided in california on date the larkins filed their form_1040 u s individual_income_tax_return for the tax_year on that return the larkins claimed a dollar_figure ordinary_loss related to their investment in california jojoba investors cji a partnership on date the larkins received a letter from respondent informing them that an investigation of cji had commenced at some point in after receiving the notice mrs larkin contacted an irs employee by telephone and asked how much was owed for she was told that the amount had not 2unless otherwise indicated all section references are to the internal_revenue_code been determined on date respondent issued a notice of final_partnership_administrative_adjustment fpaa to cji the fpaa disallowed the partnership’s claimed ordinary_loss of dollar_figure after receiving the fpaa mrs larkin again contacted the irs by telephone and asked how much she and her husband owed for she was told that the amount had not been determined but that a payment based upon the larkins’ own estimate could be made on date cji timely filed a petition in this court contesting respondent’s adjustments in the fpaa on date the parties in cal jojoba investors v commissioner docket no entered into a stipulation to be bound by the court’s decision in utah jojoba i research v commissioner docket no on date in a memorandum opinion utah jojoba i research v commissioner tcmemo_1998_6 this court determined that the partnership could not deduct its losses as ordinary and necessary business_expenses on date the larkins received a letter from the irs informing them of the court’s decision and further stating that the court’s determination in utah jojoba i research will ultimately be applied to cji investors and that if the larkins signed the enclosed agreement form they could settle their case at that time the letter further explained that if the larkins settled they would be sent a report showing the tax computations and a bill for any amounts owed the larkins did not settle their case and the irs did not assess the tax_liability at that time mrs larkin contacted the irs in response to the letter and was told that the liability had not yet been assessed but that if the larkins wanted to pay the amount owed they could do so using their own computation on date an order and decision was entered in cal jojoba investors v commissioner it became final on date days after the order and decision was entered on date respondent timely issued an affected items notice_of_deficiency to the larkins disallowing the dollar_figure flowthrough loss claimed on their federal_income_tax return and determining a deficiency of dollar_figure the affected items notice_of_deficiency also determined additions to tax under sec_6653 and the larkins did not timely petition the tax_court to contest the notice_of_deficiency on date the larkins requested an abatement of interest of dollar_figure with respect to the tax_liability for on date the request for abatement was denied on date the larkins appealed the denial to the irs’ interest_abatement_coordinator by date the larkins paid their tax_liability in full including penalties and interest on date the irs issued a form 5402-c appeals transmittal and case memo denying the request for an abatement of interest on date the irs appeals officer requested that the larkins’ tax account be updated with the following instruction please have the remaining accrued but unassessed interest assessed to the account with manual computations on date the irs sent a letter to the larkins explaining that the irs could not remove the interest on their account on date the irs examiner computed the total amount of interest to be assessed against the larkins for according to the examiner’s computation the total interest to be assessed for was dollar_figure rather than the previously assessed amount of dollar_figure on date respondent sent the larkins a letter notifying them of the change to their account for and that dollar_figure would be refunded this refund resulted from a dollar_figure decrease in assessed interest previously charged and dollar_figure of overpayment interest on date the larkins timely filed a petition for review of respondent’s failure to abate interest under sec_6404 a trial was held on date in los angeles california discussion pursuant to sec_6404 the commissioner may abate part or all of an assessment of interest on any deficiency or payment of tax described in sec_6212 if either such deficiency is attributable to an error or delay by an irs employee in performing a ministerial_act or any error or delay in such payment attributable to an irs employee’s being erroneous or dilatory in performing a ministerial_act a taxpayer can obtain relief only if no significant aspect of the error or delay can be attributed to the taxpayer 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 1986_3_cb_1 s rept pincite 1986_3_cb_1 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 sec_6404 originally enacted by the taxpayer bill of right sec_2 publaw_104_168 110_stat_1457 and codified as sec_6404 gives the tax_court jurisdiction to review the commissioner’s denial of certain taxpayers’ requests for abatement of interest but not penalties if the taxpayer files a petition with the court within days after the date a final_determination not to abate interest is mailed by the secretary 109_tc_92 thus we decline to resolve the matter of whether the sec_6653 and additions to tax can be abated because we do not have jurisdiction to do so 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 a decision concerning the proper application of federal tax law is not a ministerial_act sec_301_6404-2t b temporary proced admin regs fed reg date we proceed to consider whether respondent’s refusal to abate interest was an abuse_of_discretion our analysis is segmented into the relevant periods a date through date respondent first contacted petitioners in writing about the examination of cji on date only errors or delays occurring after the commissioner has initially contacted the taxpayer in writing with respect to the deficiency are taken into account sec_6404 an abatement of interest for the period between the date the larkins filed their return date and the date the irs contacted them in writing date is not permitted under sec_6404 see 112_tc_230 sims v commissioner tcmemo_1999_414 accordingly we conclude that respondent’s determination not to abate interest for this period was not an abuse_of_discretion b date through date on date petitioners were notified by letter that respondent had begun his examination of cji respondent concluded his examination when an fpaa for cji was issued to petitioners on date the extensive examination of a partnership which results in delays in the processing of the cases of individual taxpayers who invested in the partnership is not considered a ministerial_act kimball v commissioner tcmemo_2008_78 therefore the delay in processing the larkins’ case cannot be considered the result of a ministerial_act the larkins have failed to produce evidence that respondent committed an error or delay in the performance of a ministerial_act during cji’s examination as noted previously mrs larkin testified that on date she attempted to contact the irs to ascertain how much was owed for at the time mrs larkin made the inquiry the examination of cji had just commenced thus the irs was unable to tell her how much was owed for because the deficiency would only be determined upon completion of the cji examination since the irs had not yet examined the larkins’ tax_return when mrs larkin telephoned the irs the exact amount they owed had not been determined therefore we conclude that respondent did not abuse his discretion and the interest attributable to this decision cannot be abated for this period c november through date cji was subject_to the tax equity and fiscal responsibility act of tefra publaw_97_248 96_stat_648 partnerships are not subject_to federal_income_tax but are required nevertheless to file annual information returns reporting their partners’ distributive shares of tax items see sec_701 sec_6031 the individual partners such as the larkins are required to report their distributive shares of those tax items on their individual federal_income_tax returns see secs to remove the substantial administrative burden occasioned by duplicate audits and litigation and to provide consistent treatment of partnership tax items among partners in the same partnership congress enacted the unified_audit and litigation procedures of tefra see 64_f3d_101 2d cir h conf rept pincite 1982_2_cb_600 under tefra all partnership items are determined in a single partnership-level proceeding sec_6226 see also randell v united_states supra pincite the determination of partnership items in a partnership-level proceeding is binding on the partners and generally may not be challenged in a subsequent partner-level proceeding see secs c h this precludes the need for relitigating the same issues with each partner of the partnership should an fpaa be issued to the partnership the tax_matters_partner can contest the fpaa within days by filing for readjustment of partnership items with this court under sec_6226 the commissioner is prohibited from assessing tax based on adjustments to partnership items before the close of the 150th day after the mailing of the fpaa to the tax_matters_partner and if the tax_matters_partner files a petition in the tax_court within the 150-day period until the decision of the tax_court becomes final sec_6225 respondent issued the fpaa for cji on date no tax attributable to partnership adjustments to partners’ returns can be assessed until after a tax_court partnership case is commenced by the tax_matters_partner on date cji timely petitioned the tax_court contesting the fpaa adjustments accordingly we find respondent did not abuse his discretion in refusing to abate interest for this period because the irs was prohibited from assessing the larkins’ tax_liability between november and date because the period provided by sec_6225 had not expired d date through date on date the tax_court entered a decision in cal jojoba investors v commissioner docket no the court’s decision did not become final until date days after the decision was entered if a petition is filed in response to an fpaa sec_6225 prohibits assessment based on an adjustment to partnership items until the decision of the tax_court in the partnership’s case becomes final as a result respondent was prohibited from assessing or collecting any taxes attributable to a partnership-item adjustment related to cji before date the larkins’ deficiency for could not be assessed until date accordingly we find that respondent did not abuse his discretion in refusing to abate interest for this period because no tax could be assessed until days after the larkins received an affected items notice_of_deficiency e date through date the larkins have alleged that respondent was dilatory in his actions between date the date the tax court’s decision in cal jojoba investors v commissioner docket no became final and date the date the notice_of_deficiency was issued to the larkins the tax_court has acknowledged in previous opinions that the press of business and the commissioner’s internal processing procedures require a certain amount of time and that a mere passage of time does not establish error or delay in performing a ministerial_act see howell v commissioner tcmemo_2007_204 jaffe v commissioner tcmemo_2004_122 affd 175_fedappx_853 9th cir deverna v commissioner tcmemo_2004_80 respondent had year after the decision in cal jojoba investors v commissioner docket no became final to issue an affected items notice_of_deficiency to petitioners see sec d the limitations_period for issuing an affected items notice_of_deficiency remained open until date year after the date cji’s decision became final respondent’s issuance within the statutory period of a notice_of_deficiency is not dilatory or attributable to ministerial error accordingly respondent did not abuse his discretion for this period f date through date the larkins received a notice_of_deficiency on date sec_6213 provides that a petition for redetermination of a deficiency determined by the commissioner is timely if it is filed within days after a notice_of_deficiency is mailed the larkins had days from the date of the mailing of the notice_of_deficiency to file a petition in response they chose not to contest the notice_of_deficiency and respondent assessed the deficiency and additions to tax petitioners failed to produce at trial any evidence that there was a delay or error in performing a ministerial_act from the last day the larkins could have filed a petition contesting the notice_of_deficiency date to the day they fully paid their tax_liability date g april through date on date respondent requested that all remaining accrued but unassessed interest be assessed to the larkins’ account on date respondent issued a notice informing them of a refund due for their tax_year of dollar_figure the notice stated that the refund resulted from an dollar_figure decrease in interest previously charged and a dollar_figure overpayment of interest according to respondent’s computations only dollar_figure of interest should have been assessed not dollar_figure as a result of this computation respondent issued the larkins a refund which included the difference in interest the larkins argue that when respondent issued the dollar_figure refund respondent was tacitly admitting that they were entitled to an abatement interest abatements are permitted if a delay is attributable to unreasonable errors or delays by an official or employee of the irs in performing a ministerial or managerial act sec_6404 any abatement of interest applies only to the period attributable to the failure to perform the ministerial_act pettyjohn v commissioner tcmemo_2001_227 further sec_6404 requires that a taxpayer not only identify an error or delay caused by a ministerial_act on the commissioner’s part but also identify a specific period over which interest should be abated as a result of such error or delay spurgin v commissioner tcmemo_2001_290 the larkins have not presented any evidence of why the refund of overpaid interest should be considered a ministerial breach their refund was a result of a recomputation of the proper amount of interest not any ministerial error we conclude that respondent did not abuse his discretion by determining not to abate interest to reflect the foregoing decision will be entered for respondent


internal_revenue_service number release date index number ------------------------------- ------------------------------ ------------------ -------------------------- ty -------------------------------- ty -------------------------------- 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 ita b02 plr-101664-08 date date legend taxpayer-husband taxpayer-wife taxpayers firm year1 year2 year3 year4 dear ------------------------ -------------------------- ------------------------ -------------------------------------------------------- ----------------------------- ------- ------- ------- ------- this is in response to the letter dated -------------------------- submitted on your behalf by your authorized representative in the letter you request a revocation under sec_1 d - c of the income_tax regulations of the elections previously made to exclude qualified divided income as investment_income under sec_163 for year1 year2 and year3 additionally you request an extension of time to make a late election to treat qualified_dividend_income as investment_income under sec_163 and sec_163 of the internal_revenue_code for year4 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 taxpayer-husband is a shareholder employee of a closely held c-corporation taxpayer-wife is an employee of a regional rehabilitation provider in ------- taxpayer-husband purchased ------ of the outstanding shares of a closely held c-corporation with debt proceeds taxpayer-husband was also an employee of the corporation for many years prior to the purchase and meets the material_participation plr-101664-08 standard for the corporation’s business activities under sec_163 the interest_expense incurred to carry c-corporation stock is investment_interest subject_to the net_investment_income limitation taxpayers timely filed form_1040 for year1 year2 and year3 the returns were prepared by taxpayers’ former cpa whom taxpayers had relied upon for many years in ------------------ taxpayers retained firm to prepare taxpayers’ year4 federal_income_tax return and to review taxpayers’ previous tax returns along with the corporate returns of the corporation with which taxpayer-husband is employed upon review firm determined that the former cpa did not make or advise taxpayers to make an election under sec_163 to include qualified dividends in investment_income instead the former cpa’s tax preparation software by default automatically excluded qualified dividends from the calculation of total investment_income thus for year1 year2 and year3 taxpayers’ returns included form_4952 investment_interest expense deduction however qualified dividends were excluded from investment_income on the forms taxpayers informed firm that they were unaware of any alternatives to their tax situation accordingly firm advised taxpayers to request a private_letter_ruling requesting a revocation of the elections previously made to exclude qualified_dividend_income from investment_income and elect to treat qualified_dividend_income as investment_income for year1 year2 and year3 and an extension of time for making the election to treat qualified_dividend_income as investment_income year4 the return for year4 has not yet been filed the request for an extension of time to make a late election to treat qualified income as investment_income for year4 is filed as a protective claim in the event this matter is not resolved before the taxpayers’ current filing deadline applicable law sec_163 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 provides in 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 l ii the excess if any of -- l the net gain attributable to the disposition of property_held_for_investment over plr-101664-08 ll the net_capital_gain determined solely by taking into 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 ll or if lesser the net gain referred to in clause ii l as the taxpayer elects to take into account under this clause such term shall include qualified_dividend_income as defined in sec_1 only to the extent the taxpayer elects to treat such income as investment_income for purposes of this subsection sec_1_163_d_-1 of the income_tax regulations provides that the election for qualified_dividend_income must be made on or before the due_date including extensions of the income_tax return for the taxable_year in which the qualified_dividend_income is received sec_1_163_d_-1 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 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 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 provides that requests for extensions of time for regulatory elections other than automatic changes covered under sec_301_9100-2 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 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 plr-101664-08 service 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 sec_301_9100-3 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 informed in all material respects 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 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 taxpayers’ election is a regulatory election as defined under b because the due_date of the election is prescribed in the regulations under sec_1_163_d_-1 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 taxpayers establish that taxpayers acted reasonably and in good_faith with this request taxpayers reasonably relied on tax professionals for the filing of their returns and upon discovery of the errors promptly requested relief furthermore granting an extension will not prejudice the interests of the government it is represented that the taxpayers will not plr-101664-08 have a lower tax_liability in the aggregate for all taxable years affected by the election if given permission to make the election in the appropriate amount at this time than taxpayers would have if the election were made in the appropriate amount by the original deadline for making the election accordingly taxpayers are 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 year4 additionally taxpayers are granted consent to revoke the first election made on the year1 year2 and year3 returns these rulings are based upon information and representations submitted by taxpayers 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 under the powers of attorney on file in this office a copy of this ruling is being sent to your authorized representatives 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 george blaine associate chief_counsel income_tax accounting thomas d moffitt thomas d moffitt branch chief


internal_revenue_service number release date index number ----------------------------------------- ------------------------------------------------------------ ------------------- ------------------ -------------------------- department of the treasury washington dc person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 - plr-156209-05 date date -------- ----------------- ---------------------- ---------------------------------------------------------------------- legend x ------------------------ ---------------- a --------------------------------------------------------------------------------------- state d1 dear ------------- authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated in state on d1 a the sole shareholder of x intended for x to be an s_corporation effective d1 however no form_2553 election by a small_business_corporation was timely filed for x any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year sec_1362 provides that if -- a an election under sec_1362 is made for this responds to a letter dated date submitted on behalf of x by x’s except as specifically set forth above no opinion is expressed concerning the this ruling is directed only to the taxpayer who requested it sec_6110 based solely on the facts and the representations submitted we conclude that x pursuant to a power_of_attorney on file with this office a copy of this letter is plr-156209-05 has established reasonable_cause for failing to make a timely election to be an s_corporation effective d1 accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective d1 within days following the date of this letter then such election will be treated as timely made for x’s taxable_year beginning d1 a copy of this letter should be attached to the form_2553 federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 provides that it may not be used or cited as precedent being forwarded to x’s authorized representative enclosures cc bradford r poston senior counsel branch associate chief_counsel passthroughs and special industries copy of this letter copy for sec_6110 purposes sincerely yours