Signed 10/15/93







In Re:                            )

                                  :    FINDINGS OF FACT,

XXXXX,                            )    CONCLUSIONS OF LAW,

                                  :    AND FINAL DECISION


                                  :    Appeal No. 93-1631


                                  :    Account No. XXXXX



                             STATEMENT OF CASE

          This appeal came before the Utah State Tax Commission for a formal hearing on XXXXX.  Alan Hennebold, Presiding Officer, heard the matter for the Commission.  XXXXX appeared and testified on his own behalf.

          Based upon the evidence and testimony presented at the hearing, the Tax Commission hereby makes its:

                             FINDINGS OF FACT

          1.  The tax in question is individual income tax.

          2.  The periods in question are the years XXXXX, XXXXX and XXXXX.

          3.  Mr. XXXXX asks the Commission to waive 10% late payment penalties and interest assessed against him with respect to his XXXXX, XXXXX and XXXXX Utah individual income tax liability.  The amounts of such penalty and interest are set forth below:[1]

Year      Tax Reported            Tax Due   Penalty  Interest

XXXXX     $$$$$                   $$$$$          $$$$$        $$$$$

XXXXX     $$$$$                   $$$$$          $$$$$        $$$$$

XXXXX     $$$$$                   $$$$$          $$$$$             $$$$$


          4.  Mr. XXXXX is an insurance agent.  During the years in question, at the recommendation of his accountant, he participated in a "tax shelter" that involved the breeding and sale of rabbits.

          5.  Mr. XXXXX filed his state and federal income tax returns for those years in a timely manner, but reporting his income in light of his tax shelter activities.

          6.  During XXXXX, the Internal Revenue Service partially disallowed the tax shelter relied upon by Mr. XXXXX and others.  It then reversed its position and allowed the deductions, then reversed its position once again and disallowed the deductions.  The ultimate effect of the disallowance was to increase Mr. XXXXX's adjusted gross income for the years in question for both federal and state income tax purposes.

          7.  By XXXXX, Mr. XXXXX's state and federal tax liability had been finally determined.  He offered a compromise settlement to both the IRS and Commission staff.  He was advised by Commission staff to wait until the IRS ruled on the compromise offer.  The IRS accepted the compromise.  Mr. XXXXX notified Tax Commission staff of that fact and was told he would receive a decision on his compromise offer to the State Tax Commission.

          8.  Mr. XXXXX received no further communication regarding his state income tax liability until XXXXX, when he went to the Commission's Provo office.  At that time he was informed that his offer of compromise would not be accepted.  He therefore paid the  amount of tax due and initiated the request for waiver of penalty and interest that is now before the Commission.

                            CONCLUSIONS OF LAW

          The Tax Commission is granted the authority to waive, reduce, or compromise penalties and interest upon a showing of reasonable cause.  (Utah Code Ann. '59-1-401(8).)

                                  DECISION AND ORDER

          With respect to Mr. XXXXX's request that penalty be waived, the Commission notes that he underpaid his tax liability for the years in question on the basis of professional advice.  Furthermore, the tax shelter which caused the underpayment appears to have been a close case that was subject to conflicting interpretations by the IRS itself.  The Commission therefore finds sufficient cause to waive the penalties assessed against Mr. XXXXX for the XXXXX, XXXXX and XXXXX tax years.

          With respect to Mr. XXXXX's request that interest be waived, the Commission generally treats interest as a reasonable charge for the use of tax funds during the time they should have been paid to the Commission.  This case is somewhat different, however, since Mr. XXXXX had taken action to settle his tax liability with the Commission but did not receive a timely response.  The Commission therefore waives interest which accrued on Mr. XXXXX's tax liability for the years in question after XXXXX.  The Collection Division of the State Tax Commission is instructed to recompute Mr. XXXXX's remaining liability in accordance with this decision and advise Mr. XXXXX of the same.  It is so ordered.

          DATED this 15th day of October, 1993.



W. Val Oveson                              Roger O. Tew

Chairman                                   Commissioner


Joe B. Pacheco                             Alice Shearer

Commissioner                               Commissioner


NOTICE:  You have twenty (20) days after the date of the final order to file a request for reconsideration or thirty (30) days after the date of final order to file in Supreme Court a petition for judicial review.  Utah Code Ann. ''63-46b-13(1), 63-46b-14(2)(a).




    [1]  Interest calculated to XXXXX.