Lead Opinion
This case is before the Court for decision without trial. See Rule 122.
Petitioners argue that they are not liable for the disputed interest because they promptly paid respondent the $7,556.09 for Federal income taxes, penalties, and interest that the revenue agent who audited their 1993 through 1996 Federal income tax returns had agreed with them was their total Federal income tax liability for those years. The revenue agent had set forth the $7,556.09 on a Form 4549-CG, Income Tax Examination Changes, which petitioners promptly signed and returned to the revenue agent with their payment. Respondent’s service center in Fresno,
We decide first whether petitioners may challenge in this proceeding the existence and amount of the disputed interest. We hold they may. We decide second whether we are empowered to decide petitioners’ alternative claims that (1) the service center’s recalculation of interest for 1993 was incorrect and (2) respondent is precluded from collecting the amount reflected in the recalculation. We hold we are. We decide third whether the amount of the disputed interest, without consideration of any abatement thereof, equals as of the time of the lien the amount then sought by respondent. We hold it does. We decide fourth whether any of the disputed interest qualifies for abatement under section 6404(a)(1) or (e)(1). We hold it does not.
Background
The facts in this background section are obtained from the parties’ stipulation of facts, the exhibits submitted therewith, and the pleadings. Petitioners resided in Monarch Beach, California, when their petition was filed.
Petitioners’ 1993 Federal income tax return reported for that year that petitioners had negative total income of $113,381, negative taxable income of $175,161, and Federal income tax of zero. The return reported that the computation of total income included interest income of $11,558, capital losses totaling $2,657, deductible rental and partnership losses totaling $25,000, and NOL carryovers totaling $97,282.
Respondent’s revenue agent audited petitioners’ 1993 through 1996 Federal income tax returns and concluded his audit on or about February 3, 1998, with the issuance of a letter to petitioners’ representative, Sam Bellavia, C.P.A. (Bellavia). That letter was accompanied by a Form 4549-CG (with supporting schedules) completed by the revenue agent as to his audit of petitioners’ 1993 through 1996 tax returns. The letter and the Form 4549-CG (inclusive of the supporting schedules) informed Bellavia of the revenue agent’s adjustments to petitioners’ 1993 through 1996 tax returns and the revenue agent’s conclusion that those adjustments resulted in the following additional tax, penalties, and interest:
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As to 1993, the revenue agent listed on the Form 4549-CG and the supporting schedules that he had determined the following adjustments as increases or decreases to the taxable income petitioners reported on their 1993 return:
Capital gain . $630,764
Sec. 465 limited at risk. 6,880
Itemized deductions . 1,983
NOL carryback from 1994 . (166,364)
NOL carryback from 1996 . (301,269)
171,994
The revenue agent’s letter to Bellavia advised Bellavia to discuss the adjustments with petitioners and, if acceptable to them, to have them sign and date the Form 4549-CG and return it to the revenue agent. The letter stated that “It would be appreciated if they [petitioners] would remit the balance due of $7,556.09 [$5,413.43 + $2,142.66] at that time.” On March 3, 1998, petitioners signed the Form 4549-CG
Consent to Assessment and Collection — I do not wish to exercise my appeal rights with the Internal Revenue Service or to contest in United States Tax Court the findings in this report. Therefore, I give my consent to the immediate assessment and collection of any increase in tax and penalties, and accept any decrease in tax and penalties shown above, plus additional interest as provided by law. It is understood .that this report is subject to acceptance by the District Director.
Subsequently, respondent transferred the case to the service center for assessment. Following its review of the Form 4549-CG and supporting schedules, the service center concluded that the revenue agent had understated the amount of interest due for 1993 by prematurely netting the NOL carrybacks from 1994 and 1996 against the adjustments for 1993. The service center determined that the deficiency and related interest for 1993 were $130,926 and $39,558.63, respectively.
On March 20, 2002, respondent filed the NFTL to secure the payment of the disputed interest of $31,455.49 shown in his records still to be due from petitioners as of March 25, 2002, with respect to their 1993 Federal income tax.
Discussion
We start our analysis with a discussion of our jurisdiction to decide this case. Whether we have jurisdiction over the subject matter of a case is an issue that either party thereto, or this or an appellate court sua sponte, may raise at any time. The failure to question our jurisdiction is not a waiver of the right to do so, for if we lack jurisdiction over an issue, we do not have the power to decide it. Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee,
The Internal Revenue Code provides for our jurisdiction, and we may exercise our jurisdiction only to the extent authorized by Congress. Neilson v. Commissioner,
We have previously construed section 6330(d)(1) as granting us jurisdiction over a lien case brought under section 6320 when it involves a type of tax that we normally consider in a deficiency case, even if the lien case does not involve a deficiency in that type of tax. See Montgomery v. Commissioner,
We generally lack jurisdiction over issues concerning interest computed under section 6601. Med James, Inc. v. Commissioner,
Petitioners’ representative at the administrative hearing was not an attorney, and they are appearing before this Court pro sese. We understand them to have asserted at the administrative hearing that they are not liable for the disputed interest because: (1) The revenue agent forgave that interest in settlement of their case and (2) respondent
Respondent argues that petitioners may not in this proceeding challenge their underlying tax liability consisting of the disputed interest. According to respondent, petitioners waived their right to challenge this liability when they signed Form 4549-CG. We disagree. The Form 4549-CG petitioners signed states that they were waiving their right to contest in this Court the findings set forth in that form. We read nothing in the Form 4549-CG signed by petitioners that precludes them from challenging in this proceeding respondent’s finding made after the execution of Form 4549-CG that petitioners are liable for the disputed interest of $39,558.63. Although the $39,558.63 was “interest as provided by law”, it was not among the findings set forth on the form. To the contrary, $1,548.23 of interest was listed on Form 4549-CG as due for 1993.
Respondent relies erroneously on Aguirre v. Commissioner,
We turn to the service center’s recalculation of the disputed interest underlying the lien. Neither party has challenged our jurisdiction to decide petitioners’ claim that the amount of that interest is not the correct amount of interest that accrued on petitioners’ deficiency for 1993. Nor has either party challenged our jurisdiction to decide petitioners’ claim that, if it is the proper amount, then respondent has compromised that amount to the lesser amount of interest already paid by petitioners for 1993. Still, we believe that it is incumbent upon us to discuss our jurisdiction as to both of these matters.
Petitioners are through their petition invoking the jurisdiction that Congress provided to us in section 6330(d) as made applicable by section 6320(c). Pursuant to section 6330(d), we are empowered to redetermine the amount of an underlying tax liability whenever that liability is properly at issue and is for the type of tax that we normally consider in a deficiency proceeding. Landry v. Commissioner,
The fact that we are not specifically authorized by section 6404(h) to redetermine interest, but are specifically empowered only to decide the appropriateness of an abatement thereunder, does not mean that we also lack jurisdiction under section 6330(d) to make such a redetermination in a lien proceeding such as this. We have held that our jurisdiction under section 6330(d) allows us in a lien or levy proceeding to redetermine an underlying tax liability that is entirely self-assessed, although the liability is not a deficiency. Montgomery v. Commissioner,
Where as here the existence and amount of an underlying tax liability is properly at issue in an appeal brought under section 6330(d)(1), we review the taxpayer’s liability de novo. Segó v. Commissioner,
We disagree with both of petitioners’ arguments. As to the first argument, it is firmly established that section 7121 sets forth the exclusive means by which an agreement between the Commissioner and a taxpayer concerning the latter’s tax liability may be accorded finality. E.g., Hudock v. Commissioner,
We also disagree with petitioners’ second argument, that the assessment for the disputed interest is invalid in that they were not informed about that interest before it was assessed. Petitioners concede that the assessment was timely; we find no provision in the Internal Revenue Code that would require any such prior notification.
Interest on a Federal income tax liability generally begins to accrue from the last date prescribed for payment of that tax and continues to accrue, compounding daily, until payment is made. See secs. 6601(a), 6622. In the case of an income tax deficiency that is later reduced or eliminated by a carryback of an nol, section 6601(d)(1) authorizes the Commissioner to collect deficiency interest from taxpayers such as petitioners whose deficiencies are eliminated by NOL carrybacks. Section 6601(d)(1), which codifies the principle announced in Manning v. Seeley Tube & Box Co.,
The revenue agent did not apply section 6601(d)(1) in his computation of the disputed interest. The service center did. In accordance with the mandate of section 6601(d)(1), the service center computed petitioners’ interest for 1993 by treating the carrybacks from 1994 and 1996 as if they had arisen on April 15, 1995 and 1997, respectively. We have reviewed the specifics of the service center’s computation, and we agree with that computation. Thus, absent an abatement of any or all of the disputed interest, petitioners are liable for the amount of interest determined by the service center.
Respondent argues that petitioners do not qualify for an abatement of interest under section 6404. We agree. Petitioners do not qualify for an abatement of interest under section 6404(a)(1), given that this case is one “in respect of an assessment of * * * [income] tax imposed under subtitle A”. See sec. 6404(b); see also Melin v. Commissioner,
In sum, we hold for respondent as to all of the substantive matters in dispute. In so doing, we have considered all arguments made by the parties and have found those arguments not discussed herein to be irrelevant and/or without merit. Accordingly,
Decision will be entered for respondent.
Notes
Rule references are to the Tax Court Rules of Practice and Procedure. Unless otherwise indicated, section references are to the applicable versions of the Internal Revenue Code.
Of the $97,282, $38,891 was from 1990, $25,000 was from 1991, and $33,391 was from 1992.
The reduction in interest from $39,558.63 to $31,455.49 was attributable to (1) $1,548.23 of interest that was included in petitioners’ payment of $7,556.09, (2) $15.89 of overpayment cred- ■ its that were applied from 1995 and 1998, and (3) $6,539.02 of interest abated on May 4, 1998, in connection with respondent’s same-day tax abatement of $79,726 from the 1996 NOL carryback. (Respondent on Apr. 27, 1998, had abated $47,979 of tax for the 1994 NOL carryback.)
Sec. 6404(e) was amended by sec. 301(a)(1) and (2) of the Taxpayer Bill of Rights 2, Pub. L. 104^-168, 110 Stat. 1457 (1996), to permit the Commissioner to abate interest with respect to an unreasonable error or delay resulting from managerial or ministerial acts. That amendment does not apply here in that it is effective for interest accruing on deficiencies for taxable years beginning after July 30, 1996. Id.