142 T.C. 46 (T.C. 2014), 8220-13, Corbalis v. Commissioner of Internal Revenue

Docket Nº:8220-13
Citation:142 T.C. 46, 142 T.C. No. 2
Opinion Judge:COHEN, Judge:
Party Name:CHARLES M. CORBALIS AND LINDA J. CORBALIS, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Attorney:Cory Stigile, Sharyn M. Fisk, Della J. Bauserman, and Charles Paul Rettig, for petitioners. Najah J. Shariff, for respondent.
Case Date:January 27, 2014
Court:United States Tax Court
 
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142 T.C. 46 (T.C. 2014)

142 T.C. No. 2

CHARLES M. CORBALIS AND LINDA J. CORBALIS, Petitioners

v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

8220-13

United States Tax Court

January 27, 2014

SYLLABUS

Petitioners seek judicial review of Letters 3477 denying their claim for interest suspension under I.R.C. sec. 6404(g) and stating that the determinations are not subject to judicial review under I.R.C. sec. 6404(h). Respondent has moved to dismiss for lack of jurisdiction.

Held: The Court has jurisdiction under I.R.C. sec. 6404(h) to review denials of interest suspension under I.R.C. sec. 6404(g).

Held, further, the Letters 3477 were final determinations for purposes of I.R.C. sec. 6404(h) even though petitioners' concurrent claims for abatement under I.R.C. sec. 6404(e) were still pending.

Cory Stigile, Sharyn M. Fisk, Della J. Bauserman, and Charles Paul Rettig, for petitioners.

Najah J. Shariff, for respondent.

OPINION

COHEN, Judge:

This case is before the Court on respondent's motion to dismiss for lack of jurisdiction. The primary issue for decision is whether section 6404(h) applies to denials of interest suspension under section 6404(g). If so, we

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must decide whether the notice from which petitioners seek review is a final determination for purposes of section 6404(h)(1). All section references are to the Internal Revenue Code in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.

Background

The operative facts are set forth in respondent's motion to dismiss and have not been disputed. Petitioners resided in California at the time they filed the petition. Petitioners seek review of four separate Letters 3477 issued by the Internal Revenue Service (IRS) on October 11, 2012, in which the IRS concluded that interest suspension under section 6404(g) does not apply with respect to taxable years 1996, 1997, 1998, and 1999 because of the effective date and because it does not apply with respect to a liability reported on a return. The explanation attached to each of the letters states that examination of petitioners' returns followed petitioners' having filed two Forms 1045, Application for Tentative Refund. The consequent examination of the returns encompassed 1996, 1997, 1998, 1999, 2001, 2002, 2003, and 2004.

Petitioners assert that the amounts in issue for 1996, 1997, 1998, and 1999 resulted from disallowance of a loss carried back from 2001 and that, therefore, 2001 is also a year in issue and is the year of the relevant tax return for determining whether section 6404(g) applies. Petitioners allege jurisdiction under section 6404(h) and Rule 280. In addition, petitioners allege that they meet the requirements of section 7430(c)(4)(A)(ii) and that a final determination has been made not to abate interest under section 6404.

Each of the Letters 3477 sent to petitioners states: " The judicial review provisions of IRC section 6404(h) do not apply to IRC section 6404(g). Therefore, you do not have appeal rights, nor may you petition the Tax Court for judicial review regarding this letter."

Also on October 11, 2012, the IRS sent to petitioners two separate Letters 2289 disallowing in full petitioners' claim for abatement of interest for taxable years 1996, 1997, 1998, and 1999 under section 6404(e). Each of these Letters 2289 states: " This is not the IRS's final determination" . On November 9, 2012, petitioners filed a protest to the determinations

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set forth in the Letters 3477 and 2289 dated October 11, 2012.

Deferred Disputes

Respondent asserts that petitioners have not shown that they meet the net worth requirements of section 7430(c)(4)(A)(ii) that are incorporated into section 6404(h). Exhibits concerning petitioners' net worth were identified in the response to respondent's motion but were inadvertently omitted from the filed response. The exhibits were made part of the record by a supplemental filing by petitioners. The exhibits consist of separate affidavits and net worth statements for each petitioner compiled by their accountant and based upon acquisition costs of assets that petitioners provided to the accountant. Although we comment on that dispute below, we do not resolve it at this time.

Respondent's motion to dismiss presents those documents and arguments on which we decide whether the Court has jurisdiction in this case. For further understanding of the context, however, and to indicate which arguments will necessarily be addressed if we conclude that the Court has jurisdiction, we mention here additional contentions of the parties that appear from the Letters 3477 that the IRS sent to petitioners.

The amounts in dispute for 1996, 1997, 1998, and 1999 apparently arise from settlement of disallowed carrybacks to those years of losses claimed for 2001. The IRS letters state, among other things, that section 6404(g) does not apply to years before 1998 and that interest suspension does not apply with respect to any tax liability reported on a return. The record here is inadequate to decide how section 6404(g) applies to petitioners' loss carrybacks, and the parties have not addressed that issue in their filings. We therefore do not opine on that dispute in this Opinion.

Petitioners have asserted before the IRS various grounds for abatement of interest under section 6404(e) and continue to pursue those claims administratively. They do not dispute that the denial of their section 6404(e) claims was not a final determination. Their petition, however, deals only with interest suspension under section 6404(g).

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Discussion

Statutory Terms

Section 6404(a), (b), (e), and (f) provides: SEC. 6404. ABATEMENTS.

(a) General Rule.--The Secretary is authorized to abate the unpaid portion of the assessment of any tax or any liability in respect thereof, which--

(1) is excessive in amount, or

(2) is assessed after the expiration of the period of limitations properly applicable thereto, or

(3) is erroneously or illegally assessed.

(b) No Claim for Abatement of Income, Estate, and Gift Taxes.--No claim for abatement shall be filed by a taxpayer in respect of an assessment of any tax imposed under subtitle A or B.

* * * *

(e) Abatement of Interest Attributable to Unreasonable Errors and Delays by Internal Revenue Service.--

(1) In general.--In the case of any assessment of interest on--

(A) any deficiency attributable in whole or in part to any unreasonable error or delay by an officer or employee of the Internal Revenue Service (acting in his official capacity) in performing a ministerial or managerial act, or

(B) any payment of any tax described in section 6212(a) to the extent that any unreasonable error or delay in such payment is attributable to such officer or employee being erroneous or dilatory in performing a ministerial or managerial act,

the Secretary may abate the assessment of all or any part of such interest for any period. For purposes of the preceding sentence, an error or delay shall be taken into account only if no significant aspect of such error or delay can be attributed to the taxpayer involved, and after the Internal Revenue Service has contacted the taxpayer in writing with respect to such deficiency or payment.

(2) Interest abated with respect to erroneous refund check.--The Secretary shall abate the assessment of all interest on any erroneous refund under section 6602 until the date demand for repayment is made, unless--

(A) the taxpayer (or a related party) has in any way caused such erroneous refund, or

(B) such erroneous refund exceeds $50,000.

(f) Abatement of Any Penalty or Addition to Tax Attributable to Erroneous Written Advice by the Internal Revenue Service.--

(1) In general.--The Secretary shall abate any portion of any penalty or addition to tax attributable to erroneous advice furnished to the taxpayer in...

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