4.25.10  Case Closing Procedures

Manual Transmittal

August 07, 2015

Purpose

(1) This transmits revised IRM 4.25.10, Estate and Gift Tax, Case Closing Procedures.

Background

IRM text pertains to Estate and Gift Tax Examination case closing procedures. This IRM provides direction which is Estate and Gift Tax specific.

Material Changes

(1) This transmittal reissues existing procedures. Editorial changes have been made throughout this IRM. Website addresses, legal references, and IRM references were reviewed and updated as necessary.

(2) Interim Guidance Memorandum SBSE-04-0914-0064, New Time-frames for Estate and Gift Tax Cases Subject to Appeals Jurisdiction, expiring on September 5, 2015 was incorporated throughout IRM 4.25.10. See IRM 4.25.10.2.6.

(3) IRM 4.25.10.1.2(3) is a new paragraph intended to remind examiners of the potential signature authority limitations of IRC 2203.

(4) 4.25.10.2.7.4, New Information Provided by Taxpayer to Appeals After Issuance of 30-day Letter, is a new IRM section explaining the general impact of new appeal time frames. The section provides cross-references to relevant Appeal’s IRM subsections, and citations to the Appeal’s policy web page and the Estate and Gift Tax SharePoint.

(5) IRM 4.25.10.3.2.1 was moved in its entirety to IRM 4.25.10.3.2.

(6) IRM 4.25.10.3.2.3 was moved in its entirety to IRM 4.25.10.3.4, Prepare Form 5346. No other changes were made to this IRM subsection.

(7) IRM 4.25.10.3.2.2 was moved to IRM 4.25.10.3.5. The new IRM 4.25.10.3.5, Prepare Letters for Mailing by CCP, is a revised IRM section that provides instructions relating to new Letter 627, Closing Letter procedures, and provides a cross-reference the IRM 4.25.10-2 table of letters issued at closing. Cross references to these procedures effective for estates filed after June 1, 2015 were made throughout the IRM.

(8) IRM 4.25.10.3.2.4 was moved in its entirety to IRM 4.25.10.3.6, Prepare Lien Packages for Advisory.

(9) IRM 4.25.10.3.7(5)(a-m) were moved in their entirety to IRM 4.25.10.3.3, Prepare Form 5344.

(10) IRM Exhibit 4.25.10-2, Other Letters Mailed at Closing, was edited to include a table that summarizes the purpose, preparation, signature and mailing requirements of each letter.

Effect on Other Documents

IRM 4.25.10 dated January 7, 2014 is superseded. This IRM incorporates Interim Guidance Memorandum SBSE-04-0914-0064, New Time-frames for Estate and Gift Tax Cases Subject to Appeals Jurisdiction expiring on September 5, 2015.

Audience

This section contains instructions and guidelines for Small Business/Self-Employed Estate and Gift Tax Specialty Programs employees.

Effective Date

(08-07-2015)

Barbara J. Fiebich
Director, Specialty Examination Policy
Small Business/Self-Employed

4.25.10.1  (01-07-2014)
Conclusion of Examination in General

  1. This section provides information on procedures for concluding an examination of estate and/or gift tax returns, including taxpayer rights and report writing requirements. For case closing procedures for delinquent returns, substitute for returns (SFR) or project cases, see IRM 4.25.8, Delinquent Return and SFR Procedures.

4.25.10.1.1  (01-07-2014)
Taxpayer Rights

  1. Once a determination regarding adjustments to an examined return has been made, the examiner should discuss findings with the taxpayer and/or authorized representative.

  2. If a change in the tax assessment or use of the applicable credit amount is proposed, or if the taxpayer otherwise has a right to appeal the findings, the examiner must issue Pub 3498, The Examination Process, to the taxpayer as an attachment to the first draft report. Issue Publication 3498 indicating the taxpayer has appeal rights when:

    1. A change in assessment of tax is proposed in the examination of a Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, or Form 709, United States Gift (and Generation-Skipping) Tax Return.

    2. A decedent’s Form 706, shows the estate elected to port Deceased Spousal Unused Exclusion (DSUE) and the examination results in an assessable change to the reported tax (includes where DSUE is zeroed out and the estate becomes taxable).

    3. A decedent’s Form 706 shows the estate used DSUE (during life on Forms 709 or at death), and examination results in an assessable change to the estate’s reported tax.

    4. Form 709 results in No Change with Adjustments where an adjustment to the gift reported by the donor is based on legal or valuation issues. Donor has rights under IRC 7477.

    5. Form 709 results in No Change with Adjustments for a donor’s Form 709 where the only change(s) affect the DSUE available to the donor (and no adjustment to the gift reported by the donor is based on legal or valuation issues), the donor has no rights under IRC 7477, but may appeal the findings under IRM 8.1.1.3.2, No Immediate Tax Consequence Cases.

4.25.10.1.2  (08-07-2015)
Report of Examination Results and Waiver

  1. Prepare the applicable examination report forms as discussed in IRM 4.25.6.2, Estate and Gift Examination Report Forms, for issuance to the taxpayer.

  2. Examiners may verify interest computations regarding IRC 6166 with the Estate and Gift Campus. To request a review or verification of a computation, contact the Campus Processing Unit for your territory by fax or e-mail. The contact information for each territory is available on the Estate and Gift website. E-mail with taxpayer data must be sent using the secure messaging feature. The subject line of the secure message should not include any taxpayer information. Responses will be provided within one week. Information needed to verify interest calculations includes:

    • Copy of audit report with tentative interest computation, if seeking a verification of its accuracy

    • Name of taxpayer

    • Date of death, if applicable

    • Social security number of taxpayer

    • Specifics of case needed to calculate interest

  3. Estates and trusts act through their fiduciaries (e.g., executors, personal representatives, trustees, or administrators). A person acting in a fiduciary capacity is required to file Form 56 , Notice of Fiduciary Relationship. See IRC 6903. These persons are generally not required to execute Form 2848, Power of Attorney and Declaration of Representative. See CFR 601.504(b) . Further IRC 2203 defines the term “executor” for estate tax purposes, and provides the right to sign waivers agreeing to adjustments to the estate tax and attendant additions to tax (penalties). However, there are limits to the signature authority rights granted to executors under IRC 2203. IRC 2203 does not extend the statutory executor concept beyond the estate tax regime established in Chapter 11, nor does it provide any authority to execute Form 870 to waive restrictions for assessment of income tax or to execute Form 890 to waive restrictions on assessment of gift tax or generation skipping transfer tax. Examiners should verify the scope of the estate’s fiduciary signature authority when soliciting waiver signatures for fiduciary income tax, gift tax, generation skipping transfer tax adjustments and additions to tax.

4.25.10.2  (01-07-2014)
Conclusion of Examination by Type of Closure

  1. This section provides specific information on concluding an examination based on the type of closure.

4.25.10.2.1  (01-07-2014)
Conclusion of Survey After Assignment

  1. Examiners who survey a case after assignment will use Form 3187, Survey After Assignment, to explain the reasons for the survey decision, or include a complete written explanation in the Form 9984, Activity Record, and the appropriate workpapers. The total number of hours on the case, including time charged directly to the case and time charged to Code 615, Survey, will be noted on the Form 3187 in the "Enclosures " block. If the Form 3187 is not used, then the total number of hours, including time charged directly to the case and time charged to Code 615, Survey, should be noted on the Form 9984, Activity Record. The case will be hand-stamped "Survey After Assignment" and must display the dated signatures of the examiner and the group manager.

  2. Select the Manage Survey button in IMS to access Form 3187.

  3. Refer to closing procedures below at IRM 4.25.10.4.1 (1), for closing a surveyed case and IRM 4.25.10.4.1 (2), for closing a surveyed claim.

4.25.10.2.2  (01-07-2014)
Conclusion of No Change No Adjustments Examination

  1. For No Change No Adjustments cases, prepare a Form 1273, Report of Estate Tax Examination Changes, or a Form 3233, Report of Gift Tax Examination. The figures in both columns of the Report will be the same.

  2. A report must be issued and must include the following language: "NO CHANGE- SUBJECT TO CHIEF, ESTATE AND GIFT TAX APPROVAL." This language will automatically appear on a Report generated in Notebook when the Agreement Section of the General Information tab shows" No Change."

  3. Refer to closing procedures at IRM 4.25.10.3, Case Closing Procedures in General, and IRM 4.25.10.4.2, Case Closing Procedures for No Change No Adjustments.

4.25.10.2.3  (01-07-2014)
Conclusion of No Change with Adjustments Examination

  1. No Change with Adjustments cases include changes to applicable credit amounts, marital deductions, charitable deductions, and other corrections (including certain adjustments to DSUE related returns) that do not impact tax liability on the examined return. Also included are offsetting adjustments that do not result in a change in tax liability. See IRM 4.10.8.2.2, No Change with Adjustment Reports.

  2. For an estate tax examination, a No Change with Adjustments case report requires Form 1273, Report of Estate Tax Examination Changes, Form 6180, Adjustments to Taxable Estate, and Form 886-A, Explanation of Items, for all schedules where changes were made from the amounts and items originally reported. A Pub 3498, The Examination Process, should not be issued to the taxpayer and a Form 890, Waiver of Restrictions on Assessment and Collection of Deficiency and Acceptance of Overassessment, is not required.

  3. For a gift tax examination, a No Change with Adjustments case report requires a Form 3233, Report of Gift Tax Examination, and a Form 886-A for an explanation of each adjustment. A Publication 3498 should be issued with the report.

  4. Where the No Change with Adjustments results from a change to the value of a gift reported by the donor, a Form 890 should be obtained with the signature executed in the adjustment to the applicable credit amount section.

  5. Where the No Change with Adjustments results only from changes that affect the DSUE amount available to the donor (and no changes were made to the value of a gift reported by the donor), no Form 890 is obtained.

  6. If the taxpayer does not agree with the adjustments in Estate Tax cases where the determination is No Change with Adjustments:

    1. The taxpayer has no statutory rights to contest a determination that does not result in a change to the estate tax liability. However, pursuant to IRM 8.1.1.3.2 Appeals may consider cases with “No Immediate Tax Consequence Cases. Close the case, whether agreed or not, following the closing procedures below at IRM 4.25.10.3, Case Closing Procedures in General, and IRM 4.25.10.4.3, Case Closing Procedures for No Change with Adjustments.

      Note:

      Any change(s) to a Form 706 DSUE election that remains nontaxable after examination will always result in No Change with Adjustments, and there are no appeal rights for such results. See IRM 4.25.10.1.1, Taxpayer Rights, and IRM 4.25.10.2.3, Conclusion of No Change with Adjustments Examination.

    2. If the statute of limitations is open under IRC 6501 and on examination the Form 706 with DSUE election becomes taxable, use normal agreed, partially agreed, or unagreed procedures. See IRM 4.25.10.4.4 through IRM 4.25.10.4.6.2.

    3. If the return becomes taxable but the IRC 6501 statute is not open, use No Change with Adjustments procedures to zero out the DSUE election. See IRM 4.25.10.2.3 and IRM 4.25.10.4.3.

  7. If the taxpayer does not agree with the adjustments in gift tax cases with a determination of No change with Adjustment:

    1. The taxpayer may contest a legal or valuation determination made with respect to a gift, even without a tax assessment, under IRC 7477. If the taxpayer does not agree to the No Change with Adjustments report, close the case following the procedures below at IRM 4.25.10.2.6, Conclusion of Unagreed Examination, and IRM 4.25.10.4.6, Case Closing Procedures for Unagreed Cases.

    2. Where no change to the value of a gift was proposed, but changes were made only to the DSUE amount available to the donor, the taxpayer may not contest the change under IRC 7477. The taxpayer may appeal the findings under IRM 8.1.1.3.2, No Immediate Tax Consequence Cases.

    3. Close the case following the procedures below at IRM 4.25.10.2.6, Conclusion of Unagreed Examination, and IRM 4.25.10.4.6, Case Closing Procedures for Unagreed Cases.

4.25.10.2.4  (08-07-2015)
Conclusion of Agreed Examination

  1. If there is a change in the tax assessment and the case is agreed, the examiner will:

    1. Prepare a draft Form 1273, Form 6180 and Form 886–A. The report will explain all changes made during the course of the examination. Form 1273 will contain a summary of the adjustments and a computation of the estate tax.

    2. Prepare Form 3233, Report of Gift Tax Examination, in place of Form 1273, if it is a gift tax audit.

    3. Prepare and secure Form 890, Waiver of Restrictions on Assessment and Collection of Deficiency and Acceptance of Overassessment.

    4. Solicit payment for all agreed deficiencies. Compute the interest on the deficiency that will be paid to a date that will afford time for the taxpayer to review the report and submit the payment.

      Note:

      In addition to payment by check, The Electronic Federal Tax Payment System ( EFTPS) is available for payment of deficiencies. Refer taxpayers to Pub 966, The Secure Way to Pay Your Federal Taxes for Businesses and Individuals, and Pub 4990, Tax Payment Instruction Booklet, for more information.

    5. Pursuant to IRC 6631, include language in the cover letter or report that interest calculations made by the examiner are tentative and a final calculation could result in an amount of interest that is more or less than the interest amount calculated by the examiner.

    6. Provide the taxpayer with a copy of Pub 3498, The Examination Process. See IRM 4.10.8.1.2.

    7. If payment is received, complete the Form 3244-A, Payment Posting Voucher. Follow the instructions for processing payments on the Estate and Gift SharePoint, in the Payment Remittances folder.

      Note:

      Notification must be sent to the Remittance Unit for remittances $1 million or larger.

    8. Close case following time frames set forth in IRM 4.25.1.1.6(4), Efficient Resolution and Recommended Time-frames.

  2. When completing the Form 890, the examiner should verify the form for accuracy using the following guidelines:

    • Part 1, Consent to Assessment and Acceptance of Overassessment of Form 890 is signed by the taxpayer when they agree to an increase or decrease as to the tax and/or penalties assessed.

    • Part 2, Unified Credit Agreement is signed by the taxpayer only when there is an adjustment resulting in an increase or decrease in the total allowed unified credit. A Part 2 signature is not required if the recommended adjustment results in an assessment or overassessment of tax or penalties as shown in Form 890, Part 1.

    • Part 3, Gift Tax Unified Credit or Marital Deduction is signed by the taxpayer in order to agree with the recommended increase or decrease in the usage of the gift tax marital deduction reported on a Form 709.

    • Parts 2 and 3 of Form 890 is used only when consent is sought to adjust the allowed Unified Credit or the Gift Tax Marital Deduction.

  3. Refer to the closing procedures at IRM 4.25.10.3, Case Closing Procedures in General, and IRM 4.25.10.4.4, Case Closing Procedures for Agreed Cases.

4.25.10.2.5  (01-07-2014)
Conclusion of Partially Agreed Examination

  1. If the taxpayer does not agree to all of the proposed adjustments, but will agree to some of the proposed adjustments, the case is partially agreed. Examiners are encouraged to secure, in unagreed cases, partial agreements.

    1. The examiner will prepare two reports.

    2. Each report must specifically show which adjustments are agreed and which are unagreed. The agreed change in tax must be stated separately from the unagreed change in the tax liability.

    3. The first report, Form 1273 or Form 3233, as applicable, will address the agreed adjustments. Generally, the figures returned by the taxpayer will be reflected in the "Shown on Return" column. The agreed changes will be reflected in the "As Corrected" column. A Form 6180, Forms 886-A and Form 890 should also be included. To complete the agreed report follow procedures at IRM 4.25.10.2.4(1), Conclusion of Agreed Examination.

    4. The second report, Form 1273 or Form 3233, as applicable, will show the unagreed changes. Work from the figures agreed upon in the first report in the "Shown on Return" column. The unagreed changes will be reflected in the "As Corrected" column. A Form 6180, Forms 886-A and Form 890 should also be included. To complete the unagreed report, follow the procedures at IRM 4.25.10.2.6, Conclusion of Unagreed Examination.

    5. Explain the procedure for administrative appeal as well as the option to pay any deficiency and file a claim for refund if the taxpayer or taxpayer’s representative is not knowledgeable regarding these procedures.

    6. To close the partially agreed examination, refer below to IRM 4.25.10.4.5 , Case Closing Procedures for Partially Agreed Cases.

4.25.10.2.6  (01-07-2014)
Conclusion of Unagreed Examination

  1. In estate, gift, and generation skipping transfer tax examinations, if the taxpayer does not agree to the proposed adjustments, the case is unagreed. The examiner will:

    1. Solicit a statement of the taxpayer’s position on each unagreed issue. Consider the taxpayer’s position and document the case file before concluding the examination.

    2. Explain the procedure for administrative appeal, as well as the option to pay any deficiency and file a claim for refund if the taxpayer or taxpayer’s representative is not knowledgeable regarding these procedures.

    3. Determine whether case is eligible for Fast Track Settlement (FTS) procedures. See IRM 4.25.13.3, Fast Track Settlement.

  2. The examiner, in conjunction with the manager, should then examine and confirm the statute date to determine whether a 30-day Letter or a Notice of Deficiency (Statutory Notice Letter) should be issued.

  3. As a prerequisite for acceptance of an unagreed case by Appeals, there must be a certain amount of time remaining on the statute of limitations when initially received by Appeals:

    • There must be at least 365 days remaining on the statute of limitations for assessment when a Gift or Fiduciary Income Tax case is initially received by Appeals.

    • There must be at least 270 days remaining on the statute of limitations for assessment when an Estate Tax case is initially received by Appeals.

    • There must be at least 210 days remaining on the statute of limitations when a case is received in Examination, if Appeals releases jurisdiction of the case to Examination for consideration of new information or new issues raised by the taxpayer.

    • There must be at least 180 days remaining on the statute of limitations when a case is received in Appeals, if Appeals previously released jurisdiction of the case and returned it to Examination for consideration of new information additional analysis and/or determination new issues.

  4. If there is sufficient time to issue a 30-day letter after the taxpayer communicates disagreement with the proposed adjustments, the manager should consider all the facts and circumstances involved with the return, including but not limited to the following factors, to determine whether a 30-day Letter should be issued:

    • The time necessary for the examiner to issue the 30-day Letter, receive the taxpayer’s response, consider that response, and prepare any necessary rebuttal.

    • The likelihood that the taxpayer will request an extension of the initial 30 day response period.

    • A minimum of 30 days for processing the case file to Appeals after review of the response.

    • A minimum of 10 days to account for the time necessary to process the case file from the date of closing by the examiner to the date the case file is reviewed and closed by the group manager.

    • The nature of the disputed issues.

    • The complexity of the facts involved.

    • The applicable legal authorities.

    • The proximity of the statute of limitations and the availability of an extension, if applicable.

  5. If there is insufficient time remaining on the statute of limitations to send a 30-day letter when the taxpayer communicates disagreement with the proposed adjustments, a Notice of Deficiency must be prepared in accordance with the current procedures set forth in IRM 4.8.9, Statutory Notice of Deficiency.

  6. In unagreed cases involving an examination of a Form 709:

    1. Where an increase in value of a gift proposed by the IRS does not generate a gift tax deficiency, examiners should issue a preliminary determination letter using Letter 950-G, Contact Letter to Explain Appeals Rights Per IRC 7477.

    2. Upon receipt of Letter 950-G, the taxpayer must file a formal protest to request an Appeals conference. IRC 7477 requires that the taxpayer exhaust all administrative remedies before the case can be reviewed by the tax court. A formal protest must include the following language: "Under the penalties of perjury, I declare that I examined the facts stated in the protest, including any accompanying documents, and, to the best of my knowledge and belief, they are true, correct and complete." The other requirements for filing a formal protest are explained in Pub 3498, The Examination Process. IRM 4.25.10.2.6.1, Preparing the 30-day Letter, provides additional instruction for the issuance of Letter 950-G and procedures for closing the unagreed case to Appeals.

      Note:

      In situations where the donor does not respond to the preliminary determination letter, or expressly declines to participate in the Appeals process, the examiner should close the unagreed case to Technical Services. Technical Services will issue Letter 3569. If a donor does not respond to a preliminary determination letter, or if a donor does not participate in the Appeals process, the Tax Court will likely consider the donor to have failed to exhaust administrative remedies. In such cases, the IRS may challenge any allegation in the donor’s petition to tax court for an IRC 7477 declaratory judgment that the donor has exhausted all administrative remedies.

    3. Where only changes to DSUE are proposed by the IRS (and not changes in value to reported gifts), examiners should issue a preliminary determination letter using Letter 950-F.

  7. The unagreed report is similar in preparation, documentation and information as an agreed report. Report writing procedures are set forth at IRM 4.10.8, Report Writing.

    1. Prepare Form 1273, Report of Estate Tax Examination Changes, Form 6180, Adjustments to Taxable Estate, and Form 886–A, Explanation of Items, for all changed items. Use Form 3233, Report of Gift Tax Examination, for gift tax audits in place of Form 1273.

    2. In the report, all significant issues including alternative arguments and whipsaw issues must be raised and discussed. If more than one section of the Code is applicable, all applicable sections should be cited because the further the case proceeds, whether to Appeals or Tax Court, the more difficult it may become for the Service to raise new or alternative issues.

    3. All supporting documents obtained from referral specialists, including financial analyst reports and valuation reports should be included with the report.

    4. Prepare Form 890, Waiver of Restriction on Assessments and Collection of Deficiency and Acceptance of Overassessments. Form 890, page 2 provides the taxpayer with the opportunity to consent to the increase or decrease in the total allowed Unified Credit.

4.25.10.2.7  (01-07-2014)
Preparation of the 30-day Letter

  1. The examiner and the group manager have significant roles in preparing a 30-day Letter for issuance to the taxpayer.

4.25.10.2.7.1  (01-07-2014)
Examiner Created 30-day Letter Package

  1. Prepare Letter 950, Letter 950 -F, Letter 950-G, Letter 950-J or Letter 950-K, as appropriate.

    • Address the letter to the taxpayer.

    • Include the taxpayer TIN; if SSN include V or W definer.

    • Use the current INOLE address unless evidence to the contrary.

    • Include form number, tax period, telephone numbers and last seven digits on your SmartID Card.

    • Person to Contact (group manager). Signature authority is delegated to an SBSE group manager .

    • Last Date to Respond should be at least 35 days (preferably 37 days) from the anticipated mailing date of the letter.

    • Include the return address.

  2. Prepare appropriate tax report(s) and waiver(s), if appropriate, based on the tax return under examination.

  3. Complete Letter 937, Transmittal Letter for Power of Attorney, for the POA (as appropriate, if the Form 2848 or Form 8821 is in the case file or Declaration of Representative on Form 706 is signed).

  4. Prepare a return envelope without postage. Include your address and notate 30-day on lower left corner.

  5. Prepare an envelope with the taxpayer’s address.

  6. Prepare an envelope with the POA’s address.

  7. Assemble three packages as described in paragraphs eight through ten for submission to the group manager for review and signature.

  8. The examiner will send the following package to the taxpayer:

    • Two copies of Letter 950, Letter 950 -F, Letter 950-G, Letter 950-J or Letter 950-K with mailing date left blank for manager’s signature

    • Blank Form 13683, Statement of Disputed Issues

    • Tax report(s)

    • If an estate tax or gift tax return (except for DSUE-only changes), Form 890, Waiver of Restriction on Assessments and Collection of Deficiency and Acceptance of Overassessments, or Form 890 -T, Waiver of Restrictions on Assessment and Collection and Acceptance of Overassessment as to Transferee or Fiduciary Liability for Estate, Gift and Generation - Skipping Transfer Tax

    • If a fiduciary income tax return, Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment

    • Pub 3498

    • Return envelope

    • Envelope addressed to the taxpayer

  9. If the Form 2848 or Form 8821 is in the case file or if there is a signed Form 706 Declaration, the examiner will send the following package to the power of attorney:

    • Letter 937 with a copy of all of the documents included in the taxpayer package

    • Envelope addressed to the POA

  10. The examiner should also place a copy of the documents included in the POA package at the beginning of the administrative file, and upload a copy to the IMS Administrative Issue "Closing Data" subfolder.

4.25.10.2.7.2  (01-07-2014)
For the Manager:

  1. Review 30-day Letter packages. Review letter, report and waiver for errors, omissions, typos, or other potential problems.

  2. Process 30-day Letter taxpayer package:

    1. Date and sign the Letter 950, 950-F, Letter 950-G, Letter 950-J or Letter 950-K, as indicated.

    2. Stamp or notate the taxpayer package Letter 950, Letter 950-F, Letter 950-G, Letter 950-J or Letter 950-K as "Original" ; the POA package Letter 950 as "Copy" ; and the File package Letter 950 as "File Copy" .

    3. Mail the taxpayer package and the POA package via regular mail. Return the file copy to the examiner.

  3. Upon issuance of the 30-day Letter, the taxpayer may request a meeting or telephone conference with the group manager. The taxpayer’s response deadline may change if the group manager grants an extension request.

4.25.10.2.7.3  (01-07-2014)
Taxpayer’s Protest:

  1. If the amount of tax and penalties exceeds $25,000, the taxpayer must submit a formal protest. Pub 3498, The Examination Process, details the requirements for filing a written protest.

  2. Upon receipt and review of the written protest, the examiner may determine items in the response need to be addressed and write a rebuttal. If so:

    1. Label the examiner's response "Rebuttal to Protest" and send to the taxpayer as an attachment to a cover letter. Examiners may use Letter 5072, Examiner's Rebuttal, to send the rebuttal to the taxpayer. Letter 5072, with the attached rebuttal, should be included with the taxpayer’s protest in the case file. See IRM 4.10.9.5.3(1)(c), Forms and Other Documents Inside the Case File.

    2. If the examiner prepares a rebuttal to the taxpayer’s protest, it must be shared with the taxpayer and representative at the time it is sent to Appeals. See Rev. Proc. 2012-18. Document the case file to note the rebuttal was provided to the taxpayer.

    3. The taxpayer need not be given an opportunity to respond to the rebuttal before sending the case to Appeals. If the Appeals Officer believes that further involvement of Estate and Gift is needed, Appeals will initiate the contact in accordance with the ex parte guidelines. See IRM 4.25.13.1.1, Ex Parte Communications.

  3. If an agreement is received after the issuance of a 30-day Letter, the case should be closed using Disposal Code 04. See IRM 4.4.1-11, Disposal Codes .

4.25.10.2.7.4  (08-07-2015)
New Information Provided by Taxpayer to Appeals After Issuance of 30-day Letter

  1. Examiners are the first finders of fact and are responsible for taking relevant testimony and examining books, papers, records, or memoranda, included in Federal tax returns. Therefore, when a taxpayer submits new information or evidence or raises a new issue to Appeals that warrants investigation and/or requires additional analysis in a non-docketed case, Appeals generally returns the case to Examination for a determination.

  2. If new issues are raised in the protest the examiner should address them in the rebuttal. Depending on the type of information provided, Appeals will either release jurisdiction back to the originating examination function, or a make a referral to the examining function for review and comment. See IRM 8.7.4.2. Cases returned to estate and gift tax either under a release of jurisdiction or for review and comment are routed to Estate and Gift Examination through Estate and Gift Workload Selection and Delivery (WSD). Where Appeals retains jurisdiction, the examiner will complete the review of new information or new issues raised by the taxpayer within 30 days of receipt from WSD.

  3. Prior to examiners closing an unagreed case to Appeals, examiners should work with taxpayers and their representatives to obtain all necessary information. If material information requested on Form 4564, Information Document Request, or through correspondence was not provided, the examiner should contact the taxpayer to determine why the document or information was not provided.

    Note:

    If a taxpayer or representative refuses to provide requested material information to the examiner, the examiner's group manager will discuss the case with the taxpayer or representative to facilitate receipt of the requested information. If necessary the examiner and group manager will determine whether a summons for the information and/or documentation is appropriate. Generally, the case file should not be sent to Appeals unless requested material information has been provided. See IRM 1.4.40.4.11.5, Unagreed Case Procedures.

  4. The following IRM subsections provide definitions and guidelines relating to the treatment of new information by Appeals:

    • IRM 8.2.1.8.3 , Verification of New Information

    • IRM 8.6.1.6.4 , Taxpayer Raises New Issue

    • IRM 8.6.1.6.5 , Taxpayer Raises New Theory or Legal Argument

    • IRM 8.6.1.6.7 , Jurisdiction Released

    • IRM 8.7.4.2 , Estate Tax Cases Worked In Appeals

    • IRM 8.7.4.3 , Introduction to Gift Tax Cases

    Note:

    The Estate and Gift Appeals IRM 8.7.4.2 explains how appeals will deal with new information or new issues. Additional job aids, interim guidance and frequently asked questions are available through the Appeal’s Policy web page, and estate and gift tax specific guidance and flow charts are available on the Estate and Gift Tax SharePoint.

4.25.10.2.8  (08-07-2015)
Preparation of the Statutory Notice

  1. For cases requiring review and approval of Area Counsel, the Statutory Notice Letter must be submitted to Area Counsel with at least 60 days remaining on the statute for approval of the Statutory Notice Letter. Area Counsel will return the case to the referring individual for forwarding to the Technical Services reviewer within 45 days of receipt.

  2. Refer to Notice of Deficiency Procedures for Estate and Gift Tax Cases: A Work Aid, for detailed guidance on Statutory Notice Letter procedures, requirements, time frames and model paragraphs.

  3. The examiner will assemble three packages as described in paragraphs four through six and submit them to the group manager for review. Technical Services will review and mail the packages.

  4. Package ONE for Taxpayer:

    • Two copies of Letter 902 (DO)or Letter 902 (T)

    • Form 3614-A (Estate Tax) or Form 3615-A (Gift Tax) showing adjustments and revised computation of tax

    • Form 886-A, Explanation of Items

    • Form 4089, Notice of Deficiency - Waiver

    • Notice 1214, Helpful Contacts for your Notice of Deficiency

  5. Package TWO for POA:

    • Letter 937

    • Copy of all documents included in the taxpayer package

  6. Package THREE for the File:

    • Copy of all the documents included in POA package

    • Upload a copy of the documents to the IMS Administrative Issue "Closing Data" subfolder

    Note:

    If the taxpayer pays the full deficiency before the Notice of Deficiency is issued, determine whether the taxpayer agreed with the deficiency or is making an IRC 6603 deposit. See Rev. Proc. 2005-18 and IRM 8.20.6.3.3, Determining the Type of Remittance—Payment of Tax or Section 6603 Deposit.

  7. A 706-GS(D) Statutory Notice Letter package should contain the following:

    1. For Form 706-GS(D) cases, the adjustments to the Form 706-GS(D) are used to support the computation. Write (preferably in red) at the top of the a copy of the form, "Computation of Tax Due," and attach the relevant 886-A explanation for asserting the tax liability.

    2. Form 4089 operates as the waiver for the 706-GS(D) examination.

    3. Notice 1214 provides the taxpayer with a list of contacts.

    4. Letter 902: In completion of Letter 902, include the following language: "We have determined an assessment against you in the amount of (insert amount of liability), plus interest as provided by law, which constitutes your personal liability under 31 USC 3713(b), as a trust beneficiary, for generation skipping transfer tax due from the estate of (insert name of estate)."

4.25.10.3  (01-07-2014)
Case Closing Procedures In General

  1. This section provides information on procedures required to close an estate and/or gift tax case, once the examination has been concluded.

4.25.10.3.1  (01-07-2014)
Obtain Necessary IDRS Transcripts (AMDISA, BMFOLT, BMFOLI, and INOLE)

  1. Verify that the correct statute date is reflected on all transcripts. Transcripts should be less than 30 days old, preferably less than one week.

  2. Review transaction codes to ensure that the correct assessed tax is reflected on all Notebook Report Forms.

    Note:

    IRS Processing Codes and Information is available on the intranet.

  3. Review transcripts to determine if any of the following items need to be addressed on the Form 3198:

    • Delinquency Indicator (1) for penalties

    • MF-TC 96X OR 97X for amended or supplemental returns

    • MF-TC 34X for 6166 election

4.25.10.3.2  (08-07-2015)
Form 3198, Specialty Handling Notice

  1. Within the Notebook Job Aid, select the appropriate disposal code and deploy Form 3198. Verify auto-populated items. Complete items not auto-populated, upload the document to IMS to the "closing data" case file folder and print the Form 3198 for the hard copy administrative case file.

  2. Complete the Business Unit Section: Estate or Gift

  3. Employee Preparing Form Section: Primary Business Code (213); Secondary Business Code (below, or see Document 6036); Group Number (1XXX); Employee ID/Badge No.: Last 7 digits on examiner’s SmartID Card; Taxpayer Identification Number (TIN) and Earliest Statute Date.

    Note:

    Secondary Business Codes are:

    • Northeast - 91700

    • East - 91900

    • Central - 92300

    • West - 92500

  4. Complete the Taxpayer Name section:

    1. Use the current INOLE address (i.e., last known address) unless there is evidence to the contrary.

    2. If the address for the taxpayer has been changed (see Form 8822), complete the Form 2363, Master File Entity Change, and fax it to Centralized Case Processing (CCP). Include the original Form 2363 and fax confirmation in the case file.

    3. Check Power of Attorney (POA) and enter valid period(s) if the Form 2848, Power of Attorney and Declaration of Representative or Form 8821, Tax Information Authorization is in the case file or if Form 706 Declaration is signed.

  5. If possible, when closing cases from the group, all related cases should be closed with the controlling, primary or key cases on the top. See IRM 4.10.9.5(3). However, if it is not possible to close all related cases with the key case, the Form 3198 should only list cases closing simultaneously. For example, if the primary return (key case) is closing with three out of five related returns, the upper right hand corner of the Form 3198 should only list those three related cases. The examiner should notate the Form 9984, Activity Record, that the case is being closed without related return for particular years and the reason the examiner is not closing the specified returns. Reasons for closing returns separately may include: short statutes, new appraisals obtained for subsequent years, and additional assets that need consideration. On the Form 3198, the examiner should input the following information in the "related taxpayer or key case information" section:

    • The taxpayer name

    • The tax identification number (social security number)

    • The MFT

    • The tax period

  6. Expedite Processing section:

    1. Select if the statute is less than 90 days

    2. Select if IRC 6166 election was made and is valid

    3. Select if agreed and unpaid deficiency over $100,000

  7. Complete Special Features section as appropriate:

    1. If IDRS printouts show a 96X or 97X, or an amended return is in the file, the return should be reviewed and the amended return box should be checked.

    2. If IDRS printouts show a delinquency indicator of "1" , check "Other Instructions" box, write "Delq Ind 1" , and address whether penalties were applied.

  8. Complete Forward section:

    1. Check "Forward to Tech Services" if case is unagreed.

    2. Check "Forward to CCP" for all other cases.

    3. Complete "Date Closed to Manager" and "Manager’s Name" .

  9. Complete Return information as appropriate:

    1. Tax Period (YYYYMM if 709; DOD if 706)

    2. MFT (51 if 709; 52 if 706; 05 if 1041)

    3. Time Applied (include all time from other team members and specialists, do not include time charged to Activity Code 615)

    4. Disposal Code

    5. Tax deficiency, if any

    6. Penalty code section and amount, if any

    7. Agreement date, if any

    8. Payment Y/N

  10. Common disposal codes used in estate and gift tax closures include:

    • 01 - No Change with Adjustments

    • 02 - No Change no Adjustments

    • 03 - Agreed

    • 04 - Agreed After 30-day Letter

    • 07 - Protested to Appeals (30-day Letter)

    • 08 - Unagreed (Statutory Notice Letter)

    • 12 - Agreed Form 8939 Penalty

    • 32 - Surveyed After Assignment

    • 00 - Closed Form 8939

      Note:

      For full list of disposal codes, see IRM Exhibit 4.4.1-11, Disposal Codes. See IRM 4.25.8 for specific disposal codes for Project and Research cases.

  11. Complete Letter Instructions for CCP Section on the back of Form 3198 as follows:

    1. Verify that the appropriate letter boxes were correctly auto-populated by Notebook

    2. Verify that the "Other Instructions" field is completed with the POA name and address, if applicable.

    3. Refer to Closing Procedures by Type of Closure below for further instructions.

4.25.10.3.3  (08-07-2015)
Prepare Form 5344

  1. Create a Form 5344, Examination Closing Record, in IMS, verify auto-populated items, and print. See the Importing Closing Data Into IMS, help file in Notebook for instructions on auto-populating several of the fields discussed below.

    1. P7-34: Auto-populated but verify

    2. Item 8: Enter Agreement Date, if applicable

    3. Item 12: Tax, Penalty and Interest Adjustments:

      • Deficiency: Transaction Code 300 and amount of deficiency

      • Overassessment: Transaction Code 301 and amount of refund

      • Penalties applied: Transaction Code 160 and amount of penalty

      • Penalties abated: Transaction Code 161 and amount abated

      Note:

      The transaction codes listed above do not represent an all-inclusive list of codes.

    4. Item 13: Enter disposal code. See IRM 4.25.10.3.2(10).

    5. Item 15: Transaction Code 076 for Estate or 077 for Gift Cases and amount of deficiency, abatement, or zero for no change. Also enter appropriate TC for assessed or abated penalties.

    6. Item 28: Examiner’s time: auto-populated but verify time includes all team members and specialists.

    7. Item 30: Examination Technique Code will always be 3 (three).

    8. Item 31: Examiner’s Grade: auto-populated but verify.

    9. Item 33: Examiner’s Name: auto-populated but verify.

    10. Item 408: Enter "P" if primary return, or "S" if related return.

    11. Item 410: Enter Aging Reason Code (See IRM 4.25.1.6).

    12. Item 411: Circle type of payment.

    13. Item 412: Circle "I" if Installment Agreement, otherwise circle" N" .

    Note:

    For specific instructions on completing Form 5344 depending on type of closure, see IRM 4.25.10.4.1 through IRM 4.25.10.4.6.

    Note:

    For manual completion instructions, see IRM 4.4.12, Examined Closings, Surveyed Claims and Partial Assessments, and the IMS Manual, located on the Estate and Gift SharePoint, at the IMS and Notebook Resources folder.

4.25.10.3.4  (08-07-2015)
Prepare Form 5346

  1. If reported nonprofessional executor fees are $10,000 or over, a Form 5346, Examination Information Report, should be prepared paying close attention to the following:

    1. Upload form to the IMS Administrative Issue "Closing Data" subfolder.

    2. Attach a copy of the Form 5346 and Form 4421, Declarations–Executor Commissioner’s and Attorney’s Fees to Schedule J or the Schedule J Issue Lead Sheet.

    3. Staple a copy of the Form 5346 along with a copy of the Form 4421, a copy of the first three pages of the Form 706 and a copy of Schedule J.

    4. Clip the package to the front left side of the case file.

    5. The group manager should ensure that the Form 5346 package is routed to the address listed on the Estate and Gift SharePoint, at Executor Fees folder.

    6. If the examiner was unable to obtain a Form 4421 prior to closing, submit the Form 5346 with a copy of the first three pages of the Form 706 and Schedule J. A closing should not be unreasonably delayed due to examiner’s inability to obtain a Form 4421 from the non-professional personal representative.

4.25.10.3.5  (08-07-2015)
Prepare Letters for Mailing by CCP

  1. The examiner must prepare and obtain group manager signatures on all other letters issued by CCP. The letters included in the case file should match the letter instructions selected on Form 3198, and be attached to Form 3198 at closing. There is an exception as provided in paragraph two immediately below. CCP will issue the letter(s) pursuant to the letter instructions identified on Form 3198. Exhibit 4.25.10-2 , Misc. Letter Preparation Instructions for various letter preparation instructions.

  2. The Estate Tax Closing Letter, Letter 627 is prepared, signed and mailed by CCP. The examiner is not required to prepare Letter 937, Transmittal Letter for Power of Attorney to accompany Letter 627. CCP will send the Power of Attorney a copy of the Letter 627 if the examiner includes the name and address of the Power of Attorney in the "Other" field located at the bottom of the "Letter Instruction for CCP" section of the Form 3198.

  3. Letter 627, Estate Tax Closing Letter, is prepared, signed, dated and mailed by CCP at the time an estate tax case is closed. The following table sets forth instructions for when an estate filing a Form 706 will receive Letter 627. Since taxpayers will no longer automatically receive a copy of the signed report with the closing letter, examiners will issue a signed copy of the estate tax report to the taxpayer and POA, if applicable, prior to closing the case. These rules apply to Estate Tax Returns filed after January 1, 2015, but before June 1, 2015. All Estate Tax Estate tax returns filed prior to January 1, 2015 will received a closing letter. FOR RETURNS FILED ON OR AFTER JUNE 1, 2015, LETTER 627, ESTATE TAX CLOSING LETTERS, WILL ONLY BE SENT IF REQUESTED BY THE TAXPAYER.

    IF. . . AND. . . THEN . . .
    The filing threshold was met
    • No portability election was made; or

    • The portability election not denied; or

    • The portability election was denied due to a late filing

    A closing letter will be issued if requested by the taxpayer
    The filing threshold was not met
    • No portability election was made; or

    • The portability election was not denied

    A closing letter will be issued if requested by the taxpayer
    The portability election was denied due to late filing No closing letter will be issued
    The return was filed pursuant to Rev. Proc. 2014-18 The portability election was not denied A closing letter will be issued if requested by the taxpayer
    The portability election was denied due to failure to meet the requirements No closing letter will be issued

4.25.10.3.6  (08-07-2015)
Prepare Lien Packages for Advisory

  1. Prepare a 2032A Lien Package if there is a valid IRC 2032A Special Use Valuation election. See IRM 4.25.11.1, IRC 2032A Special Use Valuation Election.

  2. Prepare a 6166 Lien Package if there is a valid IRC 6166 Installment Payment election. See IRM 4.25.11.2, IRC 6166 Installment Payment Elections.

4.25.10.3.7  (08-07-2015)
Items to be Uploaded and Completed in IMS

  1. Verify all issues have a Uniform Issue List (UIL) Code in IMS. A UIL code for each issue is required to close the case. See IRM 4.25.5.2.1.6, Uniform Issue List (UIL) Codes.

  2. Verify taxpayer information and the taxpayer’s representative information has been input in IMS.

  3. Complete Form 9984, Examining Officer’s Activity Record, in IMS. See IRM 4.25.5.2.2, Time Sheet and Form 9984 Activity Record, for examples of items to be recorded on the Form 9984.

  4. Confirm all workpapers, closing documents, and tax return data have been uploaded to the Administrative Issue subfolders as follows (one subfolder within each of the following subfolders may be created):

    • Admin Forms: Examination Process and Documentation (EPD) Mandatory Forms and Lead Sheets, Correspondence, other Examination Workpapers, and Documents and Information provided by the taxpayer that relate to disputed or unagreed issues. All lead sheets and workpapers from Notebook should be uploaded to IMS at the beginning of the examination and worked on in IMS.

    • Closing Data: Upload All Notebook Closing Documents and Report Forms, and the case’s XML file or zip file, as appropriate. (See the Notebook folder "Deployed Form/TP/Report Forms." ) Scan and upload the signed Waiver, Form 890, if any.

    • Tax Return Data: Limited to return information such as scanned returns. For instructions regarding the deployment of Notebook Closing Reports and Forms, see the Notebook Manual, accessible from within the Notebook Job Aid.

      Note:

      See IRM 4.25.5.2.3 and IRM Exhibit 4.25.5-1 for a list of IMS uploads requirements.

  5. Create a Form 5344, Examination Closing Record, in IMS, verify auto-populated items, and print.

  6. Close the Case in IMS.

    1. Synchronize the case to upload and download all files.

    2. Check in all workpapers and documents.

    3. Enter actual closed dates for the case and for each entity.

    4. Access the Case Inventory screen to change the case status to closed.

    Note:

    If the closing is successful, a message providing "Case data will be removed from your case inventory" will appear. The case will no longer be in the Case Inventory.

4.25.10.3.8  (08-07-2015)
Case File Assembly

  1. Verify the tax return is complete and intact, as originally filed.

  2. The classification sheet or a copy of the classification folder that contains classification data for the case must be included in the closed file.

  3. Assemble required EPD documents and workpapers using the EPD tabs (Document 12555). EPD tabs are required. See IRM 4.25.5.3, Estate and Gift Tax Exam Process and Documentation (EPD).

  4. Add the Form 10364 -A, Statute Expiration Case Notice, and/or Form 895, Notice of Statute Expiration from Notebook, as appropriate.

    • If the statute is within 210 days, complete Form 10364-A (red folder or red sheet).

    • If the statute is 6 months or less, complete Forms 10364-A and 895.

    • Some groups may generate the Form 895 from ERCS and forward to the examiner for acknowledgement.

  5. Refer to IRM Exhibit 4.25.10-1 for Case File Assembly.

4.25.10.4  (01-07-2014)
Case Closing Procedures by Type of Closure

  1. This section provides detailed closing information for estate and/or gift tax cases, based on the type of closure.

4.25.10.4.1  (08-07-2015)
Case Closing Procedures for Survey After Assignment

  1. Survey After Assignment – Not a Claim

    1. Complete Form 3187, Survey After Assignment and attach to case file. See IRM 4.25.10.2.1, Conclusion of Survey After Assignment.

    2. Complete Form 5351, Examination Non-Examined Closings. Use the Status EGC label if available. If the label is not available, enter the TIN, MFT, Tax Period, Name Control, and enter Requester/EGC/Date in the area provided at the top of the form.

    3. Create and complete Form 3198. Refer to IRM 4.25.10.3.2, except for the differences noted below:

      • Forward Section: Use Disposal Code 32

      • Letter Instructions for CCP

        706 – Check box "Estate Tax Closing Letter 627" if estate filed before June 1, 2015. See IRM 4.25.10.3.5 for additional case specific instructions.

        709 – Check box "No Letter required to be sent by CCP"

    4. Stamp "Survey After Assignment" stamp on the face of the return. Sign, date, and forward to your manager for signature.

  2. Survey After Assignment – Claim

    1. Complete steps in Section (1), Survey After Assignment, except for the differences noted below.

    2. Do not use Form 5351.

    3. Create and complete Form 3198. Refer to IRM 4.25.10.3.2, except for the differences noted below:

      • Special Features Section: Check the box for "Surveyed Claim"

      • Forward Section: Use Disposal Code 34

      • Letter Instructions for CCP:

        706 – Check box "Estate Tax Closing Letter 627" if estate filed before January 1, 2015. See IRM 4.25.10.3.5 , Prepare Letters for Mailing by CCP for instructions affecting returns filed after January 1, 2015.

        709 – Check box "No Letter required to be sent by CCP"

    4. Create and complete Form 5344. Refer to IRM 4.25.10.3.3(5), except for the differences noted below:

      • Item 13: Enter disposal code 34

      • Item 21: Enter the amount claimed

      • Item 22: Enter 0 (zero)

      • Item 23: Hours worked on claim

      • Item 24: Enter claim type, B for Form 843, Claim for Refund and Request for Abatement, or Z for any other claims

      • Item 28: Hours worked on non-claim issues

    5. Stamp "Survey After Assignment" on the face of the claim. Do Not stamp the original return. Sign, date, and forward to the group manager for signature.

4.25.10.4.2  (08-07-2015)
Case Closing Procedures for No Change No Adjustments

  1. Follow items in IRM 4.25.10.3, Case Closing Procedures In General, except for the differences noted below:

    1. Create and complete Form 3198. Refer to IRM 4.25.10.3.2, except for the differences noted below:

      • Forward Section: Use Disposal Code 02

      • Letter Instructions for CCP

        706 – Check box "No Change Letters: Letter 590" and attach prepared Letter 590

        706 – Check box "Estate Tax Closing Letter 627" if estate filed before January 1, 2015. See IRM 4.25.10.3.5 , Prepare Letters for Mailing by CCP for instructions affecting returns filed after January 1, 2015.

        709 – Check box "No Letter required to be sent by CCP"

    2. Create and complete Form 5344. Refer to IRM 4.25.10.3.3(5), except for the differences noted below:

      • Item 12: Transaction Code 300 and zero in the amount column

      • Item 12: Transaction Code 160 and zero in amount column (if Delq. Ind. 1)

      • Item 13: Enter disposal code 02.

      • Item 15: Transaction Code 076 for estates or 077 for gifts with zero in amount column. Also enter appropriate TC for assessed or abated penalties.

4.25.10.4.3  (08-07-2015)
Case Closing Procedures for No Change with Adjustments

  1. Follow items in IRM 4.25.10.3, Case Closing Procedures In General, except for the differences noted below.

    1. Create and complete Form 3198. Refer to IRM 4.25.10.3.2, except for the differences noted below:

      • Forward Section: Use Disposal Code 01

      • Letter Instructions for CCP

        706 – Check box "No Change Letters: Letter 1156" and attach prepared Letter 1156

        706 – Check box "Estate Tax Closing Letter 627" if estate filed before January 1, 2015. See IRM 4.25.10.3.5 , Prepare Letters for Mailing by CCP for instructions affecting returns filed after January 1, 2015.

        709 – Check box "No Letter required to be sent by CCP"

    2. Create and complete Form 5344. Refer to IRM 4.25.10.3.3(5), except for the differences noted below:

      • Item 12: Transaction Code 300 and zero in the amount column

      • Item 12: Transaction Code 160 and zero in amount column (if Delq. Ind. 1)

      • Item 13: Enter disposal code 01

      • Item 15: Transaction Code 076 for estates or 077 for gifts with zero in amount column. Also enter appropriate TC for assessed or abated penalties.

      • Item 422: Enter dollar amount of applicable credit adjustment

    Note:

    In regular examination, No Change with Adjustments cases should be closed using disposal code 01, whether or not a Form 890 is secured. In project cases, delinquent and substitute returns, No Change with Adjustment cases may use disposal code 03. See IRM 4.25.8, Delinquent and Substitute for Return Procedures.

4.25.10.4.4  (08-07-2015)
Case Closing Procedures for Agreed Cases

  1. Follow items in IRM 4.25.10.3 , Case Closing Procedures In General, except for the differences noted below:

    1. Create and complete Form 3198. Refer to IRM 4.25.10.3.2, except for the differences noted below:

      • Forward Section: Use Disposal Code 03

      • Letter Instructions for CCP

        706 – Check box "Estate Tax Closing Letter 627" if estate filed before January 1, 2015. See IRM 4.25.10.3.5 , Prepare Letters for Mailing by CCP for instructions affecting returns filed after January 1, 2015.

        709 – Check box "No Letter required to be sent by CCP"

    2. Create and complete Form 5344. Refer to IRM 4.25.10.3.3 , except for the differences noted below:

      • Item 12: Transaction Code 300 and deficiency in the amount column

      • Item 12: Transaction Code 160 and penalty in amount column (if Delq. Ind. 1, must be input, even if zero)

      • Item 13: Enter disposal code 03

      • Item 15: Transaction Code 076 for estates or 077 for gifts and deficiency in amount column. Also enter appropriate TC for assessed or abated penalties.

4.25.10.4.5  (08-07-2015)
Case Closing Procedures for Partially Agreed Cases

  1. A partially agreed case contains at least one agreed issue and at least one unagreed issue. The examiner must complete two reports. To close the partially agreed case, the agreed report must be processed first, and the unagreed case procedures apply to the remaining issues. See IRM 4.25.10.2.5 , Conclusion of Partially Agreed Examination.

4.25.10.4.5.1  (08-07-2015)
Procedures the Examiner Should Complete

  1. For the agreed report:

    1. Create and complete Form 3198. Refer to IRM 4.25.10.3.2, except for the differences noted below:

      • Special Features Section: Check the box for "Partial Assessment Requested"

      • Other Instructions Section: "Return via fax when completed"

      • Forward Section: Use Disposal Code 03

      • Tax Deficiency: Agreed amount only

      • Penalties: If applicable, for agreed amount only

      • Letter Instructions for CCP: No letter required to be sent by CCP

    2. Create and complete Form 5344. Refer to IRM 4.25.10.3.3(5), except for the differences noted below:

      • Write "Partial Agreement – Agreed Portion" in the top center margin.

      • Item 12: Transaction Code 300 and agreed deficiency in the amount column

      • Item 12: Transaction Code 160 and agreed penalty in amount column (if Delq. Ind. 1, the penalty amount must be input, even if zero)

      • Item 13: Enter disposal code 03

      • Item 15: Transaction Code 076 for estates or 077 for gifts and agreed deficiency in amount column. Also enter appropriate TC for assessed or abated penalties.

  2. For the unagreed report:

    1. Create and complete Form 3198. Refer to IRM 4.25.10.3.2, except for the differences noted below:

      • Special Features Section: Check the box for "Partial Assessment Requested"

      • Other Instructions Section: Write in "Final Closure – partial assessment previously completed"

      • Forward Section: Forward to Tech Services

      • Disposal Code: 08

      • Tax Deficiency: Unagreed amount only

      • Penalties: If applicable, for Unagreed amount only

      • Letter Instructions for CCP: No letter required to be sent by CCP

    2. Create and complete Form 5344. Refer to IRM 4.25.10.3.3(5), except for the differences noted below:

      • Item 12: Transaction Code 300 and enter only the unagreed increase or decrease after the processing of the partial assessment in the amount column

      • Item 12: Transaction Code 160 and unagreed penalty in amount column (if Delq. Ind. 1, the penalty amount must be input, even if zero)

      • Item 13: Enter disposal code 08

      • Item 15: Trans. Code 076 for estates or 077 for gifts cases and the unagreed deficiency amount. Also enter appropriate TC for assessed or abated penalties.

4.25.10.4.5.2  (01-07-2014)
Assessment of Agreed Portion

  1. The agreed portion must be assessed prior to closing the unagreed case. Fax the following to CCP to get the partial agreement assessed:

    • Fax cover sheet stating "Partial Assessment Request"

    • Pages 1 and 2 of the return with a BMFOLT transcript

    • Agreed Report – Partial Assessment (see IRM 4.25.10.2.5)

    • Signed Form 890

    • Form 3198 completed for the Agreed Report

    • Form 5344 completed for the Agreed Report (Disposal Code 03)

    • Penalty amounts should be computed and included on the Form 5344

      Note:

      Do not update case to status 51

  2. CCP will stamp the Form 5344 "Request Completed" and fax a copy back to the group. Retain the copy in the case file.

4.25.10.4.5.3  (01-07-2014)
Closure of the Unagreed Portion

  1. After receipt of the Request Completed Form 5344 fax from CCP, prepare the unagreed portion of the case for closure to Technical Services. Include the following:

    • Unagreed Report

    • Form 3198 completed for the Unagreed Report portion

    • Form 5344 completed for the Unagreed Report portion

4.25.10.4.6  (01-07-2014)
Case Closing Procedures for Unagreed Cases

  1. This section provides information on closing unagreed 30-day Letter and Notice of Deficiency cases.

4.25.10.4.6.1  (08-07-2015)
Unagreed – 30-day Letter

  1. Create and complete Form 3198. Refer to IRM 4.25.10.3.2, except for the differences noted below:

    • Forward to Technical Services Section: Check the box for "Unagreed to Appeals"

    • Forward Section: Check box "Forward to Tech Services"

    • Disposal Code 07

    • Letter Instructions for CCP: Leave blank

  2. Create and complete Form 5344. Refer to IRM 4.25.10.3.3(5), except for the differences noted below:

    • Item 12: Transaction Code 300 and deficiency in the amount column

    • Item 12: Transaction Code 160 and 0 in amount column (if Delq. Ind. 1)

    • Item 13: Enter disposal code 07

    • Item 15: Transaction Code 076 for estates or 077 for gifts with zero in amount column. Also enter appropriate TC for assessed or abated penalties.

    • Item 422: Enter dollar amount of applicable credit adjustment

4.25.10.4.6.2  (01-07-2014)
Statutory Notice of Deficiency

  1. Create and complete Form 3198. Refer to IRM 4.25.10.3.2, except for the differences noted below:

    • Forward to Technical Services Section: Check the box for "Unagreed for Statutory Notice" . If unagreed adjustment to unified credit and no taxpayer protest was received in response to Letter 950-G, Check "Other" and write "No response received from exam issued Letter 950-G"

    • Forward to Technical Services Section: If a claim disallowance (full or partial), Check "Statutory Notice of Claim Disallowance - Letters 905 and 906"

    • Forward Section: "Check box Forward to Tech Services"

    • Disposal Code 08

    • Letter Instructions for CCP: Leave blank

  2. Create and complete Form 5344. Refer to IRM 4.25.10.3.3(5), except for the differences noted below:

    • Item 12: Transaction Code 300 and in the amount column

    • Item 12: Transaction Code 160 and zero in amount column (if Delq. Ind. 1)

    • Item 13: Enter disposal code 08

    • Item 15: Transaction Code 076 for estates or 077 for gifts and in amount column. Also enter appropriate TC for assessed or abated penalties.

4.25.10.5  (01-07-2014)
Case Closing Procedures for Managers

  1. Upon receipt of the closed case by the manager, the file should be reviewed and closed within the recommended time frames of IRM 4.25.1.5.2, Efficient Resolution and Recommended Time Frames.

4.25.10.5.1  (01-07-2014)
Case Documentation

  1. Document the case review in Form 9984, Activity Record.

  2. Note any reasonable delays (i.e., shipment of case, remote manager travel, etc.) from the date the case is closed to the manager to the date the case is closed from the group.

4.25.10.5.2  (01-07-2014)
Review of the Case File

  1. Review the completed Form 3198, Form 5344, Report, Examination File and Penalties. Refer to the "Manager’s Quality Checklist for Closing Cases" lead sheet that is available in Notebook, for details.

  2. Review current AMDISA, BMFOLT, BMFOLI and INOLES (less than 30 days old) to confirm the accuracy of the balance on the account, all prior assessments have been acknowledged and used in computations, and to verify that the correct statute date is being utilized in all systems as well as in all reports and case closing documents.

4.25.10.5.3  (01-07-2014)
Grade of Case

  1. This section provides a guide for the group manager to determine the grade levels of estate, gift and generation-skipping tax cases. The guide seeks to establish a uniform standard for financial planning, position classification, and staffing utilization. The guidelines apply to all transfer tax returns.

  2. Four fields comprise the grade of case for estate and gift tax returns:

    1. Predominant issue code. The primary or predominant issue in the examination determines the first digit.

    2. Grade level of case. The common factors which most affect the difficulty of the case determine the grade level of the return which is shown as the second digit. These factors include the manner in which property is held or owned (or the transfer is affected), type of issue (legal or valuation), case management and contacts, and the scope and affect of the examination.

    3. A field reserved for future use. The third digit is always "1."

    4. The fourth digit reflects special conditions such as related returns or training returns. Related returns are graded according to the primary return, and "R" is entered as the fourth digit. "T" is entered as the fourth digit for training returns. If the special conditions do not apply, the fourth digit should be left blank.

  3. The guidelines may be used at any point in the examination process. However, at assignment, only the return information will be available. Development during the course of the examination may more fully disclose the final grade of case. Final grading factors take into account return information, as well as work papers and the report. Thus, the final grade may differ from grade on assignment. The final grade is entered in box 32 of Form 5344.

4.25.10.5.3.1  (01-07-2014)
First Digit or Issue Code

  1. Determine the first digit by referring to the primary or most significant issue in the examination. Enter the corresponding number: See Document 6036, Examination Division Reporting Codes Booklet .

    FIRST DIGIT PRIMARY OR MOST SIGNIFICANT ISSUE
    1 Real Estate and Personal Property Valuation
    2 Unlisted Business Entity Valuation
    3 Transfers
    4 Joint or Community Property
    5 Powers
    6 Miscellaneous
    7 Deductions
    8 Credits
    9 Legal Issues
    0 Generation-Skipping Tax

4.25.10.5.3.2  (01-07-2014)
Second Digit or Issue Code

  1. The second digit is used to further define the work grade of the primary or most significant issue in the examination. Enter the corresponding number. See Document 6036, Examination Division Reporting Codes Booklet .

    FIRST AND SECOND DIGITS CASE GRADE GRADE DIFFICULTY OF ISSUE
      TYPE OF OWNERSHIP
    11 Property transferred reflects outright ownership in individual, joint tenancy, tenants in common, tenancy by the entirety or community property.
    12 Property transferred is held in singular trust, partnerships, closely held businesses, pension plans and other arrangements reflecting ownership of property through an entity.
    13 Property transferred includes interrelated entities, ownership relationships in tiers, or combinations of ownership (including classes of stock, restrictive agreements, and restrictions by operation of law). May involve consolidated or related financial statements or other complicated accounting problems.
      LEGAL ISSUES
    11 Clear legal authority exists as established by state and federal law with well-settled precedents.
    12 Precedents not well established and may involve interdependent questions of state and federal law.
    13 Clear legal authority does not exist and is represented by non-existent or conflicting precedents. May involve extensive factual development to resolve legal issue. Requires comprehensive research and interpretative judgment or analogy. Issue may involve interdependency between federal and state law and may involve multiple state jurisdictions.
      VALUATION ISSUE
    11 Routine application of readily available valuation data (including comparable sales) using the market, income or cost approach. Requires consideration of nominal or no discounts. The interest is sold in a bona fide third party sale.
    12 Requires research and interpretation of comparable sales and valuation principles. Issues may involve claims for discounts or premiums which can, however, be resolved without extensive research. May require resolution of multiple valuation approaches.
    13 Requires research, interpretation, analogy and application, of comparable sales and valuation principles when data is not readily available. Involves novel issues based on new or untested principles or claims for substantial discounts. Requires resolution of multiple valuation issues and comprehensive analysis of complex financial records.
      CASE MANAGEMENT AND CONTACTS
    11 No special factors.
    12 May require review of standard appraisals and/or contact with third parties and experts in their fields (e.g., outside fee appraisals, engineering, national office appraisal services, economists or industry specialists). Issues may require customer service assistance. The prominence of the taxpayer, representative, or others has the potential for impacting local compliance.
    13 Requires evaluation of specialized appraisals, or the coordination of specialists. Issues may also require coordination with Area Counsel or Chief Counsel. May involve multiple complex issues, multiple tax returns, and/or complex interrelated computations. The prominence of the taxpayer, representative, or others has the potential for impacting national compliance.
      SCOPE AND EFFECT
    11 Limited effect.
    12 Examination potential is beyond the immediate taxpayer or has the potential to increase compliance by other taxpayers in the community. Examination may result in recurring effects in subsequent years.
    13 Examination may have extensive consequences in subsequent years or in increased compliance by other taxpayers in the nation with similar estate plans. Case may contribute to the development of important principles, which may result in new precedents.

Exhibit 4.25.10-1 
Case Assembly

  1. Forms affixed to outside of case folder, top to bottom:

    1. Form 3210, Document Transmittal

    2. Form 895, Notice of Statute Expiration, placed on top of all other papers

    3. Form 10364-A, Statute Expiration Case Notice, staple to front cover of case file

    4. Form 3198, Special Handling Notice, staple to front cover of case file

  2. Forms attached to left inside of case folder:

    1. Form 9984, Examining Officer’s Activity Record

    2. Address change sheets—Form 8822, Form 2363, and fax confirmation, if applicable

    3. Form 5346 , Examination Information Report, with attachments

  3. Forms and other documents enclosed in case folder (not all will apply):

    1. Current transcripts, preferably generated within 1 week of the date of submission

    2. Waiver and acceptance forms:

      • Form 890, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment

      • Form 2297, Waiver of Statutory Notification of Claim Disallowance

      • Form 3363, Acceptance of Proposed Disallowance of Claim for Refund or Credit

    3. Taxpayer’s protest and correspondence in unagreed cases

    4. Examination report, with appropriate letters for issuance by CCP

    5. Original tax return(s) and related attachments (See Item 4 below)

    6. Form 5546, Examination Charge-Out (attached to the back of the return)

    7. Estate Tax Mandatory Lead Sheet, Gift Tax Mandatory Lead Sheet, or Limited Scope Audit Mandatory Lead Sheet

    8. Workpapers, Correspondence, and Exhibits—following the order of the index

  4. Forms and documents to be attached to the tax return in the following order:

    1. Form 5344, Examination Closing Record

    2. Form 3187 , Survey After Assignment Form

    3. Form 3244-A, Payment Posting Voucher Examination (part 2 stapled to the face of the return)

    4. Statute extension forms: An executed copy should be stapled to the reverse side of the first page of the tax return on top of any other attached forms

      • Form 872 , Consent to Extend the Time to Assess Tax

      • Form 872-A, Special Consent to Extend the Time to Assess Tax

    5. Form 56, Notice Concerning Fiduciary Relationship, with CAF fax confirmation, stapled to the reverse of the first page of the tax return

    6. Form 2848, Power of Attorney, and/or Form 8821, Tax Information Authorization, with CAF fax confirmation(s), stapled to the reverse of the first page of the tax return

    7. Form 843, Claim for Refund and Request for Abatement or Amended Returns and Informal Claims

    8. Substitute For Return (SFR). If applicable, staple Form 13496, IRC 6020(b) Certification to the face of the SFR. See additional requirements for SFR/Non-Filer closures in the Delinquent SFR Policies folder on the Estate and Gift SharePoint

    9. Photocopy of all requests (e.g., Form 5345-D and Form 5354) using the Source Code 45 must be attached to the return being closed as a permanent record

Exhibit 4.25.10-2 
Other Letters Mailed At Closing

The following table sets forth instructions for completing letters mailed to the taxpayer at the end of the examination. These letters should be prepared using the Estate and Gift Tax Notebook Job Aid. This table does not address Letter 627, Estate Tax Closing Letter. See IRM 4.25.10.3.5 , Prepare Letters for Mailing by CCP for instructions relating to the preparation and mailing of Letter 627. Signature authority information is located in IRM 4.25.14.8, Signature Authority.

Letter Name and Number Purpose of Letter Prepared By Signature Mailing Instructions
Letter 569 (DO), Full/Partial Claim Disallowance Letter Letter 569(DO) is used by the examiner to transmit a preliminary full or partial claim disallowance. Letter 569(DO) does not replace Letter 905(DO), Final Partial Claim Disallowance Letter, or Letter 906(DO), Final Full Claim Disallowance Letter, which is prepared, signed and mailed by Technical Services. The examiner will prepare the letter and insert the examiner's information in the contact section. The group manager signs the letter. The letter is mailed by before closing the case from the group with a copy of the report.
Letter 590, No Change Final Letter Letter 590 is used on estate tax examinations that resulted in no change to the reported tax liability. This letter notifies the taxpayer and/or representative that the examination report has been reviewed and accepted. Therefore, the examination proceeding is officially closed. The examiner will prepare the Letter 590, No-Change Final Letter, to be retained undated in the case file, by inserting the group manager or examiner's information in the contact section. The group manager will sign the letter. Exam Centralized Case Processing (CCP) will date and mail the Letter 590 to the taxpayer and representative, if applicable.
Letter 1156 , Change No Change Final Letter Letter 1156 is used when an estate tax examination results in adjustments that do not change the taxpayer's liability in the year examined but do not impact any tax years for which returns were filed or other tax years for which returns are not yet due. Letter 1156 is also used when an examination results in adjustments that do not change the taxpayer's liability in the year examined but do impact other tax years that are not yet due. This final no-change letter notifies the taxpayer and/or representative that the report has been reviewed and accepted. Therefore, the examination proceeding is officially closed. The examiner will prepare the Letter 1156, Change/No Change Final Letter, to be retained undated in the case file, by inserting the group manager or examiner's information in the contact section. The group manager will sign the letter. Centralized Case Processing (CCP) will date and mail the Letter 1156 to the taxpayer and/or representative, if applicable.
Letter 902, Notice of Deficiency Notice to taxpayer of a deficiency in tax as required by Internal Revenue Code. Letter is used for estate tax, gift tax, Chapter 3 withholding tax and transferor-transferee assessment situations. Examiner or Appeals Officer prepares the letter. See Estate and Gift Statutory Notice Job Aid for preparation instructions, located on the Estate and Gift SharePoint website. Technical Services will insert contact information and sign the letter. Technical Services will date and mail the letter.
Letter 937, Transmittal Letter for Power of Attorney Letter 937 transmits copies of correspondence addressed to the Power of Attorney. This letter is to be used by examiners and replaces the obsolete Letter 937(DO). If the Power of Attorney is authorized to receive copies of correspondence with the taxpayer, the examiner will prepare the letter as a transmittal for the letters identified in this table. Varies depending on underlying letter. Examples:
  • Signed by group manager when sent with Letter 590 or Letter 1156.

  • Signed by group manager when sent with Letter 950

  • Signed by Technical Services when sent with Letter 902

Varies depending on underlying letter. Examples:
  • Mailed from group with Letter 950

  • Dated and mailed by Technical Services when sent with Letter 902

Letter 950, Unagreed, straight overassessment or mixed deficiency and overassessment This letter is used for unagreed, straight deficiency, straight overassessment or mixed deficiency and overassessment field examination cases. This letter may be used for various types of tax. Examiner prepares the letter. The group manager signs letter. The letter is mailed from the group with a copy of the report.
Letter 950-F, Appeals Request for Change/No Change Cases This letter is sent on unagreed examination cases for Change/No Change cases where the taxpayer wants to go to Appeals. The examiner should include the report with the mailing of the Letter 950-F. The examiner will prepare the Letter 950-F, Appeals Request for Change/No Change Cases. The examiner should insert the examiner's information in the contact section. The group manager will sign, date and the letter. The letter is mailed from the group with a report and noted enclosures.
Letter 950-G, Contact Letter to Explain Appeals Rights per IRC 7477 Preliminary Determination Letter showing proposed changes to the value of gifts that does not generate a gift tax for certain periods. This letter will also explain the taxpayers appeal rights under IRC section 7477. Examiner prepares the letter. The group manager will sign and date the letter. The letter is mailed from the group with a copy of the report.
Portability Denial Letter (informal) The Service notifies a taxpayer when their portability election is denied. When a case is sent to an Estate and Gift Tax field group, and the case is then surveyed, and the portability election is being denied, prior to closure the examiner will prepare a portability denial letter. The examiner will prepare the portability letter. Notebook contains a sample. The group manager will sign the letter. The letter is dated and mailed by CCP.

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