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Petitioners filed a timely petition in this Court appealing the
Appeals officer’s determination.4
The Court must decide whether petitioners are entitled to
relief from the Appeals officer’s determination. Where the
underlying tax liability is properly at issue, the Court reviews
that issue de novo. Goza v. Commissioner, 114 T.C. 176, 181-182
(2000). Although petitioners did not receive a notice of
deficiency and were entitled to challenge the underlying tax
liability, they stipulated the correctness of the Commissioner’s
assessment. Therefore, where the underlying tax liability is not
at issue, as in this case, this Court reviews the determination
under an abuse of discretion standard. Sego v. Commissioner, 114
T.C. 603 (2000). An abuse of discretion is defined as any action
that is unreasonable, arbitrary, or capricious, clearly unlawful,
or lacking sound basis in law, taking into account all the facts
and circumstances. See, e.g., Thor Power Tool Co. v.
Commissioner, 439 U.S. 522, 532-533 (1979); Swanson v.
Commissioner, 121 T.C. 111, 119 (2003).
Petitioners seek an abatement of all penalties and interest
under section 6404 with respect to their taxable years 1998 and
1999 and claim that respondent’s failure to do so amounts to an
4Petitioners petitioned the Court challenging the underlying
tax deficiencies; however, they have since stipulated to the
underlying deficiencies and seek only an abatement of interest
and penalties.
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Last modified: May 25, 2011