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Part 4. Examining Process

Chapter 8. Technical Support (Exam)

Section 8. Miscellaneous Responsibilities

4.8.8  Miscellaneous Responsibilities

4.8.8.1  (10-01-2003)
Overview

  1. This section includes duties and responsibilities assigned to Technical Services (TS), which are not addressed elsewhere. The following topics are included:

    • Accumulated Earnings Tax,

    • Closing Agreements,

    • Deficiency Dividends of a Personal Holding Company,

    • Innocent Spouse Cases,

    • Interest Abatement Cases,

    • Involuntarily Converted Property,

    • Jeopardy/Termination Assessments,

    • Offer in Compromise Cases,

    • Restricted Interest Computation,

    • Specialist Referrals,

    • Statute Expiration Cases,

    • Technical Coordination,

    • Transferee Cases,

    • Mitigation Cases

4.8.8.2  (10-01-2003)
Accumulated Earnings Tax

  1. IRC § 534(b) requires that taxpayers be notified if a proposed notice of deficiency includes an amount with respect to the accumulated earnings tax imposed by IRC § 531 so that the burden of proof initially will be on the taxpayer. Exam is responsible for notifying the taxpayer, where necessary, in cases with less than one year remaining on the statute of limitations. Pattern Letter 572 is used for this notification. See IRM 4.14.1.13.1 for Statutory Notices of Deficiency.

  2. If notification is sent to the taxpayer and (1) the taxpayer timely submits the statement (meaning the grounds on which the taxpayer relies to establish that there has been no accumulation of earnings and profits beyond the reasonable needs of the business) and (2) such grounds are supported by facts contained in the statement, then the burden of proof will be on the Commissioner as to the grounds given in the statement. See Treas. Reg. 1.534-2(a)(2), 26 CFR 1.534-2 subsection (a)(2).

  3. Usually, a Notice of Deficiency is not issued before the 60-day period for filing a statement under Treas. Reg. 1.534-2(d)(2), 26 CFR 1.534-2 subsection (d)(2) expires, unless the statutory period of limitations is due to expire, or other compelling reasons exist.

  4. Letter 572 should be mailed concurrently with the 30-day Letter in cases with less than one year remaining on the statute of limitations. Officials and reviewers delegated to sign notices of deficiency pursuant to Servicewide Delegation Order 4-8 (formerly 77, Rev. 28) are also empowered to sign notifications under IRC § 534(b). Generally, the case is forwarded to TS for signature and returned to the group for suspense following the mailing of the letters. SB/SE Delegation Order 4.3 states Compliance Section Chiefs, Group Managers in TS and RA Reviewers GS-13 are delegated authority to grant an extension of time not to exceed 30 additional days for purpose of filing the statement of grounds under Treas. Reg. 1.534-2, 26 CFR 1.534-2. If no protest is received, the case will be forwarded to TS for a Statutory Notice of Deficiency (SND). See IRM 4.14.1.13.1.

4.8.8.3  (10-01-2003)
Closing Agreements

  1. IRC § 7121 provides authority for entering into closing agreements. IRM 8.13 Closing Agreement Manual, outlines situations requiring the use of a closing agreement and provides in-depth instructions on preparing a closing agreement. Closing agreements are final and are intended to completely dispose of debatable matters. Generally, LMSB does not route closing agreements through TS.

  2. Joint Committee Cases — Closing agreements should not be executed on behalf of the Commissioner prior to clearance by the Joint Committee of Taxation.

4.8.8.3.1  (10-01-2003)
TS Responsibilities

  1. TS reviews all SB/SE closing agreements prior to obtaining the taxpayer's signature.

  2. After review, TS forwards the closing agreement to Area Counsel for approval of both the form and language used.

  3. Prior to taxpayer signature, the reviewer:

    1. Ensures that it will be advantageous to have the matter permanently and conclusively closed, or that the taxpayer can show good and sufficient reasons for an agreement and the Government will sustain no disadvantage,

    2. Ensures that the determined matters are stated in terms that can reasonably lead to only one interpretation,

    3. Gives consideration to the impact a specific matter determination will have upon other tax periods or other related cases,

    4. Verifies that the examiner's report adequately includes all significant factors. See IRM 8.13, Closing Agreements.

    5. Ensures the closing agreement is not dependent upon the taxpayer's promise to perform a future act,

    6. Determines that the correct closing agreement form is used, and

    7. Secures Area Counsel approval as required. Once approved, TS forwards the closing agreement to obtain the taxpayer's signature.

  4. After the closing agreement is executed, the reviewer:

    1. Ensures the closing agreement is properly executed, including the required number of original copies,

    2. Ensures the reverse side of the Original of each closing agreement reflects the dated signatures of both the receiving and reviewing Officers,

    3. In the top margin of the front page of the tax return, writes:
      "agreement under IRC 7121, years affected ___. Closing agreement attached to the return for the taxable period ended ___ (latest return in file)."

    4. Date stamps each executed copy of the closing agreement and forwards them to the appropriate delegated officer for signature.

    5. Attaches one copy of the original closing agreement signed by the delegated official to the reverse side of the first page of the tax return,

    6. Forwards the executed duplicate of the closing agreement to the taxpayer along with Letter 1595(P), See IRM Exhibit 8.13.1-18.

    7. Attaches the third copy to the workpapers with a copy of Letter 1595(P) and Form 4222, Closing Agreement Checksheet,

    8. makes another copy of the closing agreement and marks it as " Retention Copy," if a subsequent tax year is affected by the closing agreement. Forwards a copy on Form 5346 to PSP,

    9. Forwards the closing agreement, RAR and any applicable workpapers for suspense, as appropriate, and

    10. Immediately forwards a copy of the executed closing agreement to the Campus TEFRA Function (CTF) if the closing agreement is for a TEFRA entity.

4.8.8.4  (10-01-2003)
Deficiency Dividends of a Personal Holding Company

  1. Regulations under IRC § 547 provide a method (absent of fraud) for a corporation to eliminate its personal holding company tax liability for a prior year by making distribution of a deficiency dividend. The benefits of IRC § 547 are applicable when an examination results in an agreed deficiency in Personal Holding Company (PHC) tax.

  2. These procedures are not applicable to dissolved corporations.

  3. IRM 4.10.8.9 discusses closing procedures for deficiency dividend cases.

4.8.8.4.1  (10-01-2003)
Scope of Review

  1. The TS reviewer:

    1. Ensures there is sufficient time remaining on the statute of limitations for the PHC tax issues (12 months recommended to complete procedures).

      Note:

      Without an executed Form 2198, the case is unagreed and should be returned to the group for a 30-day letter (if no statute problem) or forwarded to the 90-day coordinator for a SND.

    2. Ensures the file includes a signed Waiver (Form 870) from the taxpayer for all PHC and non-PHC adjustments.

    3. Ensures the file includes a Form 2198, Determination of Liability for Personal Holding Company Tax (informal), or Form 866, Agreement as to Final Determination of Tax Liability, if the taxpayer indicated an intention to make a Deficiency dividend.

4.8.8.4.2  (10-01-2003)
Reviewer Responsibilities

  1. The reviewer:

    1. Reviews Form 2198 and signs, on behalf of Commissioner, as outlined in SB/SE Delegation Order 4.2.

    2. Follows the Closing Agreement section if Form 866 is used.

    3. Attaches Form 2198 to the return of the latest taxable year covered by the Agreement.

    4. Forwards Form 870 for non-PHC issues for partial assessment with instructions to return the documents to TS.

    5. Prepares Letter 1152(DO). Sends the duplicate Form 2198 and three Forms 976, Claim for Deficiency Dividend Deduction, or Credit or Refund by a Personal Holding Company or Real Estate Investment Trust, with Letter 1152(DO) by registered or certified mail. The registered/certified receipt is maintained in the case file as evidence of the mailing date ( "date of determination " ).

    6. Places case in suspense until the earlier of receipt of Form 976 from the taxpayer or 120 days from the "date of determination."

    7. Date stamps the claim if Form 976 is received and returns the case to the examiner for verification of the information on Form 976 and preparation of an examination report. Also instructs examiner to prepare Form 3189, Deficiency Dividend Deduction Transmittal, for restricted interest purposes.

    8. Returns case to the examiner for claim disallowance if Form 976 is filed after the 120-day period, although the reviewer may issue the claim disallowance to expedite case processing.

    9. Forwards the file for closure and assessment if Form 976 is not received after the 120-day period.

      Note:

      These procedures should be followed even if taxpayer stated no Form 976 would be filed.

4.8.8.5  (10-01-2003)
Interest Abatement Cases

  1. The Service may abate the interest on a deficiency or payment attributable to an unreasonable error or delay in the performance of a ministerial or managerial act.

  2. Refer to IRM 20.2.7, Interest Abatement Requests, and Treas. Reg. 301.6404–1, 26 CFR 301.6404-1 and Treas. Reg. 301.6404–2, 26 CFR 301.6404-2 for detailed procedures for interest abatement cases.

4.8.8.6  (10-01-2003)
Involuntarily Converted Property

  1. Treas. Reg. 1.1033(a)–2(c)(3), 26 CFR 1.1033(a)-2 subsection (c)(3) describes the time period and circumstances under which taxpayers may request an extension of time to replace involuntarily converted property from the Area Director or Director of Field Operations.

  2. A taxpayer's request for an extension to replace involuntarily converted property is not a determination letter subject to user fees prescribed under the first revenue procedure of the year (i.e., Rev. Proc. 2003-1). While the Service ordinarily will not solicit a fee from the taxpayer with respect to a request for an extension to replace involuntarily converted property, the Technical Coordinator may solicit an appropriate fee if the " taxpayer request also includes a request for a determination that is subject to user fees."

4.8.8.6.1  (10-01-2003)
Criteria Procedures

  1. The taxpayer must demonstrate reasonable cause for not replacing the converted property within the required time period. Refer to Revenue Ruling 60-69, 1960-1 C.B. 294.

  2. If granted, Letter 1039 is used to advise the taxpayer that an extension has been granted. Generally, extensions longer than one year are not granted. The taxpayer must notify the Service when the property is replaced.

  3. If not approved, the taxpayer is notified the extension has not been granted and the reason(s) why.

  4. The reviewer should follow-up on expired extensions and forward a Form 5346, Examination Information Report, to PSP if no response to follow-up is received.

4.8.8.7  (10-01-2003)
Jeopardy and Terminations

  1. When it is determined that the collection of a tax deficiency would be endangered if the regular assessment and collection procedures were followed, a Jeopardy assessment is made.

  2. When it is determined that a taxpayer may act to prejudice the collection of income taxes for a current tax period a Termination assessment is made.

  3. All examination Jeopardy and Termination assessments are mandatory review. Additionally, these cases both require the approval of Area Counsel prior to making the assessments.

  4. Refer to IRM 4.15, Jeopardy/Termination Assessments, for complete procedures in handling these cases.

4.8.8.8  (10-01-2003)
Offers in Compromise

  1. IRM 4.18, renumbered into IRM 5.8, Offer in Compromise, provides guidelines for the processing of all offer-in-compromise cases. Examination sections currently start at IRM 5.8.20 through IRM 5.8.26.

  2. Examination is responsible for the investigation and processing of offers in compromise (OIC) based solely on doubt as to liability.

4.8.8.9  (10-01-2003)
Restricted Interest Cases

  1. Interest is generally paid to taxpayers on tax overpayments under IRC § 6611 for the time period that the Government has use of the taxpayer's money; interest is charged on tax deficiencies under IRC § 6601 for the time period that the taxpayer has use of the Government's money. In most cases, the time period begins with the due date of the return.

  2. The Code specifies that if certain deductions, credits, and items of income are present, then the interest accrual period will be shorter, or "restricted."

  3. When an examination includes adjustments to a return (general adjustments) in which "restricted" items are also present, the tax liability subject to the "restricted" time period(s) must be identified and separated from the tax liability attributable to the "general " adjustments. Once the tax liabilities attributable to the different time periods are computed, Case Processing (CP) computes the interest attributable to each time period.

4.8.8.9.1  (10-01-2003)
Completion of Form 2285

  1. Technical Services (TS) is responsible for completing Section I of Form 2285, Computation of Increase (Decrease) In Tax, Concurrent Determinations of Deficiencies (Increases in Tax) and Overassessments (Decreases in Tax) in Cases Involving Restricted Interest Provisions of the Internal Revenue Code.

  2. Instructions on how to complete Form 2285 are outlined in IRM 20.2.8.9, Combination of Adjustments (Form 2285). Also refer to IRM 20.2.9, Interest on Carryback of Net Operating Loss.

  3. The completed Form 2285 is placed on the top of the revenue agent's report inside the case file.

4.8.8.9.2  (10-01-2003)
Scope of Review

  1. Restricted interest cases are sent to TS for special handling, and thus are subject to review only if the case is also a mandatory review case.

  2. On complex restricted interest computations, the reviewer may prepare a memorandum for an Area Counsel advisory by request of Case Processing where the application of law is not clear. The reviewer may also coordinate disagreements on restricted interest computations between the taxpayer and the tax examiner based upon interpretation of law.

4.8.8.10  (10-01-2003)
Specialist Referrals

  1. When reviewing a case, the reviewer verifies that the examiner made referrals to specialists, as appropriate. See IRM 4.10.2.6.7 and IRM 4.10.6.3.3 as references. Referrals can be made to/for the following:

    1. Engineers

    2. International Examiners

    3. Computer Audit Specialists (CAS)

    4. Art Object Valuation

    5. Outside Fee Appraisals

    6. Financial Product Specialists

    7. Employee Plans/Exempt Organizations

4.8.8.10.1  (10-01-2003)
Criteria for Engineering Referrals

  1. Mandatory Referrals:

    1. All corporate returns, including 1120–S returns, with assets of $10 million and over.

    2. All partnership and joint venture returns with annual gross receipts or total deductions of $1 million and over, from activities in leasing, construction, and natural resources.

    3. All returns with a fair market value issuance of $500,000 and over.

4.8.8.10.2  (10-01-2003)
International Referrals

  1. All returns under examination that have been selected for " International" during classification, or have features meeting the International criteria in IRM 4.60.5.2, Referral Criteria Procedures, must be timely referred. Please refer to IRM 4.60.5 and IRM 4.60.6, or their successors, for referral procedures.

    Note:

    IRM 4.60 references are subject to change due to new IRM in clearance process.

4.8.8.10.3  (10-01-2003)
Computer Audit Specialist Referrals

  1. All returns with activity codes 219 through 225, including S-corporation returns, must be referred.

  2. Cases with return charge-out stating "Record Retention Agreement on File" must be referred.

  3. All other cases may be referred depending on the volume or complexity of computer records.

4.8.8.10.4  (10-01-2003)
Art Valuation Referrals

  1. Taxpayers claiming a value of a single work of art at $20,000 or more must be referred to Headquarters. Refer to the Valuation Engineer IRM 4.48.

4.8.8.10.5  (10-01-2003)
Financial Product Referrals

  1. A Financial Product Referral is mandatory for all non-CIC cases with activity code 221 and above. See IRM 4.37.

  2. Other returns with Financial Products issues may be referred.

4.8.8.10.6  (10-01-2003)
Employees Plan Referrals

  1. Form 4632–A must be completed for all cases in which a deduction for a payment to a qualified employee benefit plan is claimed. When any response to the questions on Form 4632–A results in an entry to the extreme right-hand column, a referral must be made.

  2. Refer to IRM 4.10.2.6.7, Referrals for Specialists.

4.8.8.11  (10-01-2003)
Statute Expiration Reports

  1. Form 3999, Statute Expiration Report, is prepared when the statute of limitation expires prior to the appropriate assessment, overassessment or no-change and the case is in Compliance.

  2. IRM 25.6, Statute of Limitations, provides detailed instruction for statute expiration cases. The preliminary Form 3999 should be prepared by the employee who has reason to believe the statute has expired.

  3. Determine whether the deficiency is actually barred or if it can be assessed under one of the lesser known provisions of the statute. Refer to IRC § 6501 for exceptions to the normal three-year limitation period.

  4. Form 3999 (Statute Expiration Report), in triplicate, is used to report each of these situations and is prepared pursuant to IRM 25.6.14, Statute of Limitations. Form 3999-T is used for TEFRA key cases. See IRM 4.2.2.4, Reports on Cases Involving Expiration of the Statutory Period for Assessment.

  5. The final report on Form 3999 is routed through the Territory Manager, to the Area Director. See SBSE Delegation Order 4.58, Authority to Approve Statute Expirations, or its successor.

  6. The statute expiration coordinator in TS may review a case at the request of the Group Manager to determine if a Form 3999 is truly required before the preliminary is forwarded to the next level of management.

4.8.8.12  (10-01-2003)
Technical Coordination

  1. Examiners and taxpayers request advice regarding interpretation and proper application of Internal Revenue laws, related statutes, and regulations, to a specific set of facts in which they want an authoritative response.

  2. The Area Technical Coordinator (TC) in TS coordinates the submission and receipt of Requests for Informal Advice from Area Counsel, Requests for Field Service Advice, and Requests for Technical Advice. The TC also prepares Technical Coordination Reports, and acts as a liaison between the area and tax law specialists in responding to examiners' technical questions.

4.8.8.12.1  (10-01-2003)
Informal Telephone Assistance From Chief Counsel

  1. TCs may obtain informal assistance from Chief Counsel by telephone by referring to the Chief Counsel website for the "Code and Subject Matter Directory" .

    Note:

    For a current listing of contacts refer to Chief Counsel intranet site, http://counsel.web.irs.gov/intranet_new/main/index.asp, click on "Counsel and IRS Contacts" , next click on "CC Phone Directory" , on this page look for " Programs/Directories" , click on "Code & Subject Matter Directory" .

4.8.8.12.2  (10-01-2003)
Requests for Informal Advice from Area Counsel

  1. Examiners frequently make direct contact with the Area Counsel attorney assigned to the group. Generally, LMSB does not direct requests (other than Requests for Technical Advice) through the TC.

  2. The TC will screen written requests from group managers/examiners to ensure the pertinent facts are included, adequate research has been performed and the request for advice is appropriate, given the issue. The TC will forward requests to Area Counsel. Requests sent to Area Counsel will be maintained in a log for follow-up. Refer to IRM 39.7.

4.8.8.12.3  (10-01-2003)
Requests for Field Service Advice

  1. Field Service Advice (FSA) is case specific advice provided to examiners by the Associate Chief Counsel. Field Service Advice does not represent a final determination of Service position, even in the case in which it is requested. Examiners contact the TC to determine if a request for FSA is appropriate. The TC will review the request for FSA to determine if the request warrants Chief Counsel consideration, if it is factually complete and if adequate research has been performed. The TC forwards the request to Area Counsel, who in turn forwards the request to Chief Counsel. FSA sent to Area Counsel will be maintained in a log for follow-up.

  2. Procedures for requesting FSA are contained in the Chief Counsel Directives Manual (CCDM).

4.8.8.12.4  (10-01-2003)
Requests for Technical Advice

  1. Technical advice is requested by an examiner or taxpayer to obtain advice or guidance from the Chief Counsel as to the interpretation and proper application of Internal Revenue laws, related statutes, and regulations, to a specific set of facts in connection with an examination. A Technical Advice Memorandum (TAM) is a final determination of the Service's position for a specific case. The examiner must follow the TAM in preparing his/her report and closing the case.

  2. The Technical Coordinator (TC) will be familiar with the Revenue Procedure issued each year on this matter (second Revenue Procedure for each year); and Policy Statement P–4–82.

  3. Refer to IRM 4.2.3, Technical Advice to Taxpayers and Examination Personnel.

4.8.8.12.4.1  (10-01-2003)
Scope of Review

  1. In reviewing and processing requests for technical advice, the TC ensures technical advice is requested only when the facts have been fully developed and the issue is novel, complex or is not governed by established Service position.

  2. The TC ensures technical advice is requested when the conditions of IRM 39.7.2 exist.

  3. The TC ensures the request for technical advice includes:

    1. Completed Form 4463, Request for Technical Advice,

    2. A clear and complete statement of the issue(s):
      1) A statement of facts, statement of position with respect to the issue(s)
      2) Analysis of the applicable law, and arguments in support of the position
      3)The taxpayer’s statement of position, applicable law, and supporting arguments (not required);

    3. Copies of pertinent documents, letters, contracts, etc.,

    4. A deletions statement under IRC § 6110(c) (not required); and

    5. Power of Attorney, if applicable.

4.8.8.12.4.2  (10-01-2003)
Processing the Request for Technical Advice

  1. The Technical Coordinator signs Form 4463 as delegated under SB/SE Delegation Order 4.15. The TC mails the original and two copies with the information in paragraph (3) above to Headquarters (address is on Form 4463). If the issues(s) are related to an LMSB Technical Guidance area (formerly ISP), an extra copy should be forwarded to the appropriate Technical Advisor(s). The TC keeps a complete copy on file for reference purposes.

  2. Maintain a log of dates requests are received, forwarded, and when responses are received, in order to follow-up if necessary.

4.8.8.12.4.3  (10-01-2003)
Procedures Once the Area Receives the Technical Advice Memo (TAM)

  1. After the TAM is received from Chief Counsel, the area has 30 calendar days from the date of the TAM to provide the TAM to the taxpayer or seek reconsideration. Do not disclose the TAM to anyone that does not have a need to know.

  2. If Chief Counsel makes a determination that is adverse to the area office and with which the area disagrees, the area may request reconsideration.

4.8.8.13  (10-01-2003)
Transferee Liability Cases

  1. IRC § 6901 governs transferee liability. It is procedural only and does not impose liability on a transferee; it merely provides a mechanism through which the Government can seek to collect a taxpayer’s liability that arises under another provision of the law from the transferee.

4.8.8.13.1  (10-01-2003)
Scope of Review

  1. Upon receipt of a transferee case, review the statute of limitations for the transferee case to ensure it was computed correctly. Generally, the transferee statute is one year after the expiration of the period of limitation for assessment against the taxpayer (transferor) . Refer to IRC § 6901, Transferred Assets; and IRM 25.6, Statute of Limitations, for more discussion on the transferee's statute.

  2. Prepare Form 895 for each transferee, checking the "irregular assessment period" box and indicating that the statute was determined by IRC § 6901(c) — Transferee Liability. Annotate the transferee’s statute of limitation date and the number of years that were added to the transferor’s statute per IRC § 6901(c) to compute the transferee’s statute of limitation.

  3. The Government has the burden of proving all elements necessary to establish the transferee’s liability. Pursuant to IRC § 6902(a), reviewers must ensure that all documentation is contained in the case file to support the Government's burden of proof..

  4. There are two types of transferee liability: Transferee at Law and Transferee in Equity. Each requires different elements to support the government’s burden of proof. See Legal Reference Guide for Revenue Officers, Document 5716.

4.8.8.13.2  (10-01-2003)
Agreed Transferee Liability

  1. A transferee case is agreed if the transferee has signed Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency In Tax and Acceptance of Overassessment (for income tax cases), or Form 2504, Agreement to Assessment and Collection (for employment tax).

  2. Reviewers will ensure that the transferee was given the opportunity to agree to the proposed transferee liability. If not, the case will be returned to the examiner to solicit an agreement.

  3. The reviewer will ensure that Form 870 or Form 2504 contains the appropriate modified language and the amount of the transferor's tax, penalties and interest. The reviewer will complete Form 1296, Assessment Against Transferee or Fiduciary, and forward the case with the following instructions to Case Processing: "agreed non-master file transferee assessment, Form 1296 enclosed. "

4.8.8.13.3  (10-01-2003)
Unagreed Transferee Liability Case

  1. When an unagreed transferee case is received, the reviewer will make a cursory review of the case to ensure that the burdens of proof have been satisfied. Review the undated 30-day letter, statement, and waiver.

  2. Review Letter 955 for the proper modified language inserted in the body of the letter.

  3. Review the Statement attached to the letter.

  4. Determine if Form 870 or 2504 contains the appropriate modified language.

  5. Once the review is completed, the case file will be returned to the examiner with instructions for the group to issue the 30-day letter with all other related 30-day letters (i.e. the 30-day letter for the transferor’s income tax liability).

4.8.8.13.4  (10-01-2003)
Statutory Notice of Transferee Liability

  1. If the transferee has defaulted on the 30-day letter or if transferee statute of limitations is imminent, examiners will route the transferee case and related transferor (income tax) case to TS (Exam) for issuance of the Notice of Transferee Liability.

  2. Transferee notices require special language in the opening paragraph depending on the circumstances, such as who the transferor is (estate, individual, decedent, etc.) and how the liability arose (examination, original return liability, etc.). The language for the actual deficiency letter (Letter 902) is contained in IRM 4.14.1

  3. All Notices of Transferee Liability require mandatory review by Area Counsel.

  4. Once approved by Area Counsel, the Notice of Transferee Liability and the case file will be suspensed by the SND Coordinator. The Form 1296 will be completed at the same time as the SND.

4.8.8.13.5  (10-01-2003)
Completing Form 1296

  1. The reviewer will complete Form 1296 with the amount of tax and penalty to be assessed against the transferee. If the transferee is limited in liability (if the transferor’s total liability exceeds the assets transferred to the transferee), the reviewer will annotate Form 1296 with the date(s) the interest should begin and the amount of tax associated with each date.

4.8.8.14  (10-01-2003)
Mitigation Cases – IRC Sections 1311-1314

  1. In some cases, when an adjustment is made in an "open " year, an offsetting adjustment may be made in a "closed " year. The mitigation provisions are limited and complex. Each case, where it appears mitigation may apply, will require careful research and possible Counsel review.

  2. Reviewer Responsibility

    1. Determine whether or not the mitigation provisions apply to the situation,

    2. Determine whether or not Form 2259 (Agreement as Determination Pursuant to Section 1313(a)(4) of the Internal Revenue Code) and the statement page have been completed properly,

    3. Execute Form 2259 on behalf of the government in accordance with IRM 1.2.2.20 and SBSE Delegation Order 4.5 (subject to revision),

    4. Distribute Form 2259 and statement page:
      Original and/or executed copies associated with the appropriate tax return of each taxpayer involved.
      Copy of executed Form 2259 furnished to taxpayer.

  3. See IRM 4.8.8.3 if a closing agreement is associated.


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