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3. Whether respondent’s failure to abate interest for
petitioners’ 1995 tax year was an abuse of discretion.2 We hold
that it was not.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
Petitioners lived in North Carolina when they filed the
petition in this case. In 1995, petitioners sold and received
payment for rental residential property in Virginia that they had
depreciated. The sale price was $201,500, and petitioners’ basis
was $86,500. Petitioners used the proceeds from the sale to pay
credit card debts. Petitioners did not receive a statement at
closing showing the amount of sale proceeds from the house that
would be reported to the Internal Revenue Service (IRS).
Petitioners timely filed their 1995 income tax return. On
it, they reported that they owed income tax of $32,561 after
withholding, in part because of depreciation recapture and
capital gains resulting from the sale of the rental property.
When petitioners filed the return, they enclosed $5,000 and an
offer in compromise in which they offered to pay that amount in
full settlement of the $32,561 they owed for 1995. At that time,
petitioners had net assets of about $44,000, including cash and
bank accounts of $9,500, real estate (including a one-half
2 Respondent concedes that the Tax Court has jurisdiction
to review whether to abate interest. See Katz v. Commissioner,
115 T.C. 329, 340-341 (2000).
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