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Part 8. Appeals

Chapter 19. Appeals Pass-Through Entity Handbook

Section 5. Processing Services

8.19.5  Processing Services

8.19.5.1  (05-01-2007)
Overview

  1. This section provides procedures and exhibits on the receipt, interim processing, and closing of TEFRA cases by Appeals Processing Services (Appeals Processing Services) and other Appeals employees responsible for processing duties.

  2. This section supplements the general information contained in IRM 8.20 Appeals Case Processing Manual. IRM 8.19.5.2 through IRM 8.19.5.17 relate to case processing of TEFRA key cases only. Information on the investor cases is shown in IRM 8.19.5.18 and IRM 8.19.6.

  3. The duties of Processing Services (formerly known as Records Section, Case Processing Unit and Appeals Processing Services/WRAPS unit) will generally be standardized. However, because job titles and duties vary from office to office in the processing areas, these instructions generally will not specify the title of the person responsible for the task. Local office staffing will dictate who will process various documents.

8.19.5.2  (05-01-2007)
Receiving Case Files

  1. Cases transmitted to Appeals will include key cases as well as investor cases with non-TEFRA issues.

  2. The key case can be either a nondocketed or docketed case. The return will be a partnership Form 1065 or a S corporation Form 1120S (does not apply to S corporation tax years beginning after December 31, 1996).

  3. All TEFRA cases should be transmitted to Appeals on Form 3210. Appeals Processing Services will add current AMDISA and TSUMY prints to the case file when the PICF code is 1 or 5. (TSUMYP for PICF 1 and TSUMYI for PICF 5). Refer to IRM 8.19.5.19 for information on the Partnership Control System.

  4. Each TEFRA case should be clearly marked as a TEFRA case by Compliance. The key case file should be flagged with Form 3198, Special Handling Notice, noting "TEFRA Key Case File." Refer to Exhibits 8.19.1-2 and 8.19.1-3 for guidance on whether the case is a TEFRA case.

    Note:

    If it is uncertain whether the case is a TEFRA case, the area TEFRA coordinator (or other designated person) should be consulted when making the determination.

  5. Appeals Processing Services will sign and date stamp Form 3210. Appeals Processing Services will return the originator’s copy of the Form 3210 to the originator.

  6. Appeals Processing Services will verify the statute of limitations. At least 180 days must remain on the statute for nondocketed TEFRA key cases, and at least 180 days must remain on all live one-year assessment dates for TEFRA investor cases which are CIC corporation, Joint Committee or other corporate specialty cases. Examination is responsible for computing and assessing the tax from all TEFRA linkages which have a live one-year assessment date before the case reaches Appeals for CIC corporation, Joint Committee and other corporate specialty cases. The appeals team manager has discretion whether to accept an investor case with a live one-year assessment date or to return the case to Examination for computation and assessment of the live one-year assessment date before returning the case to Appeals for consideration of the non-TEFRA issues. See IRM 8.19.6.17(3) for an explanation of other corporate specialty cases.

  7. Processing Services will compute the estimated proposed deficiency and enter it on ACDS when the case is assigned. Depending upon local procedures, either Processing Services or Tax Computation Specialists will compute the estimated revised deficiency for Processing Services to enter it on ACDS when the case is closed. See IRM 8.19.2.6 and Exhibit 8.19.2-1. If the tax computation specialist is computing the estimated revised deficiency, it should be prepared when the computations are being prepared.

8.19.5.3  (05-01-2007)
Administrative Adjustment Request (AAR) Case Files (IRC 6227)

  1. The AAR is a TEFRA procedure that substitutes for the " claim for refund" procedures (to obtain a refund or credit) that individual investors filed under pre-TEFRA law. See IRM 8.19.7 (Administrative Adjustment Request (AAR)).

  2. The AAR is an amended return with a Form 8082, Notice of Inconsistent Treatment or Amended Return (Request for Administrative Adjustment). Generally AARs fall into two categories:

    1. AAR filed by the Tax Matters Partner/Person (TMP) affecting all partners; or

    2. AAR filed by any investor affecting just the filing investor.

  3. Any investor, including the TMP, may file the AAR under IRC 6227 within three years after the later of:

    1. the date on which the partnership return for such a year was filed, or

    2. the last day for filing the partnership return (without regard to any extensions), and

    3. before the mailing of the FPAA to the TMP with respect to such taxable year, or

  4. An investor may also file the AAR within the period covered in a consent (and for six months thereafter) if the Service has secured the consent to extend the period of assessment pursuant to IRC 6229(b). See IRC 6227(b).

8.19.5.3.1  (05-01-2007)
AAR Statute of Limitations

  1. The statute of limitations for the AAR is different from the statute of limitations for a claim for refund.

    1. The petitioner can petition a federal court after the expiration of 6 months from the date of filing of the AAR and before two years from the date of the filing of the AAR. See IRC 6228(a)(2) and IRC 6228(b)(2)(B).

    2. The two year statute under IRC 6228 can be extended with a Form 9247 (Agreement to Extend the Time to File a Civil Action Refund by Notice Partner/Shareholder With Respect to Partnership or Subchapter S Items) for the AAR filed by a partner (Exhibit 8.19.7-8) or Form 9248 (Agreement to Extend the Time to File a Petition for Adjustment by the Tax Matters Partner/Person With Respect to Partnership or Subchapter S Items) for the AAR filed by the TMP on behalf of the partnership (Exhibit 8.19.7-2).

    3. The IRC 6229(a) statute is not suspended if the AAR filed by the TMP on behalf of the partnership is petitioned to the Tax Court.

8.19.5.3.2  (02-08-2008)
Receiving AAR Case Files

  1. The AAR will be controlled based on who filed the AAR.

    1. The AAR filed by a TMP for a partnership will be controlled as a TEFRA case under the name of the partnership.

    2. PCS controls may be input by Compliance even if no Notice of Beginning of Administrative Proceeding (NBAP) was issued. If there are no PCS controls, notify the appeals team manager.

  2. The entry in the statute field on CASES depends on whether IRC 6229(a) statute is open at the time the case is received.

    1. If the IRC 6229(a) statute is open when the case is received, do NOT use the terms "CLAIM" or "DOCKT" in the statute section. The IRC 6229(a) statute should be shown in the statute field, even on docketed cases.

    2. If the IRC 6229(a) statute has expired when the case is received in Appeals, the statute field should be shown as "CLAIM" if it is a non-docketed case and "DOCKT" if it is a docketed case.

    3. If the IRC 6229(a) statute is open when the case is received in Appeals, and the appeals officer decides not to extend the IRC 6229(a) statute, refer to IRM 8.21.3.1.3.3, No Consent Required. If the decision is made not to extend the section 6229(a) statute, change the statute date to "CLAIM " on non-docketed cases and "DOCKT" for docketed cases.

  3. The AAR filed by any investor will be controlled under the name of the investor on AIMS and ACDS. Processing the case is more like a refund claim. It is not a TEFRA key case. The Service handles AARs filed on behalf of an investor in two ways.

    1. If the Service sends a notice converting partnership items to non-partnership items, the notice will be in the file when the return is received in Appeals. If the case is non-docketed, enter the IRC 6229(f) statute date in the statute field. It is one year from the date of the notice of conversion. The filing of a petition automatically converts an investor's partnership items to nonpartnership items. IRC 6228(b)(2)(A)(ii). The period for assessment expires one year from the date of the petition. If the case is docketed, the statute date should be one year from the date of the petition.

    2. If the Service does not send the conversion notice, the issue will be a refund of tax. The case will be in Appeals in non-docketed status. The statute field should be "CLAIM."

      Note:

      See Delegation Order 4-19 for authorization to sign the notice converting partnership items to nonpartnership items.

    3. The TYPE should be TEFRAI.

    4. The amount of the claim should be entered in DDAMTCLM.

  4. See also IRM 8.19.7.2.6 (AAR Received in Appeals) and IRM 8.19.7.2.7 (Statutes) for additional information on carding in AARs and the statute of limitations for AARs filed by the TMP on behalf of the partnership.

8.19.5.4  (05-01-2007)
Nondocketed Case File

  1. The nondocketed key case administrative file should contain Form 1065 for a TEFRA partnership or Form 1120S for an S corporation case (does not apply for S corporation tax years beginning after December 31, 1996).

  2. The file should also contain consents (if any) extending the statute of limitations. Form 872-P, Form 872-O, Form 872-S or Form 872-R extend the statute. (See Exhibits 8.19.1-6, 8.19.1-7, 8.19.1-8 and 8.19.1-9). In rare instances, the partnership or S corporation statute may have been extended at the investor level with a Form 872, Form 872-A, Form 872-I or Form 872-IA.

    1. Form 872 or Form 872-A will extend the statute for the investor named on the form, provided it is properly signed and dated and executed by the appropriate IRS official.

    2. Form 872 or Form 872-A must have been modified to specifically provide that it extends the period for assessment of tax attributable to partnership/S corporation and affected items. See IRM 8.19.1.6.6.8.2, Investor Level Extensions of Partnership Items.

    3. Form 872-I and Form 872-IA, specifically designed forms used to extend a partner’s non-TEFRA and TEFRA statutes, are now commonly used in Coordinated Industry Cases (CIC) cases.

  3. An unagreed Revenue Agent's Report (RAR) will be included in the case file showing the proposed partnership or S corporation adjustments.

  4. The file should contain completed Form 886-Z (C) (Partners’ or S Corporation Shareholders’ Shares of Income) listing investors who have been notified of administrative proceedings, including the following information:

    • Partnership/S Corporation Name

    • TIN of Partnership/S Corporation

    • Taxable Year Ended

    • Names of Investors

    • TINs of Investors

    • Percentage of Profit

    • Ordinary Income (Loss)

  5. The case file should also include the following:

    1. A 60-Day Letter issued by Compliance - Letter 1827(DO) (TEFRA Partnership 60 Day Letter), Letter 1829(DO) (TEFRA Partnership 60 Day Letter for Penalties and Adjustments), or Letter 1834(DO) (Agreement to Assessment and Collection).

    2. A protest.

    3. Form 8082, Administrative Adjustment Request (AAR), if the case involves a claim. This form should be attached to a Form 1065 or Form 1120S.

    4. A supplemental penalty or affected item report if penalties or adjustments to affected items have been proposed by the examiner.

    5. Executed copies of Form 870-P (Exhibit 8.19.5-1), Form 870-PT (Exhibit 8.19.4-22), Form 870-L (Exhibit 8.19.5-2), Form 870-LT (Exhibit 8.19.5-3), or Form 870-S (Exhibit 8.18.5-4), if applicable, for investors who have agreed to adjustments. See the exhibits indicated for samples of completed forms.

8.19.5.4.1  (05-01-2007)
Processing Steps

  1. Appeals Processing Services should take the following actions when a nondocketed case is received:

    1. Verify the statute of limitations date. At least 180 days must remain on the statute when non-docketed key cases are received in Appeals.

    2. Ensure that two clean copies of Form 886-Z (C) are in the file. The clean copies should show taxpayer information, but adjustments should not be filled in. These copies may be used to record any adjustments made in Appeals.

    3. Complete ACDS processing as shown in IRM 8.19.5.6, IRM 8.19.5.6.1 and IRM 8.19.5.6.2.

8.19.5.5  (05-01-2007)
Docketed Case File

  1. The administrative file should contain the same items shown in IRM 8.19.5.4. In addition, the following should be included:

    1. A copy of the FPAA/FSAA

    2. A copy of the certified mailing list

    3. A copy of the petition or petitions

  2. Appeals Processing Services will check all petitions for required signatures and dates. There may be multiple petitions filed in one or more courts for an FPAA/FSAA. Specific rules are established by statute regarding which petition will control (see IRM 8.19.3.13.1).

8.19.5.5.1  (05-01-2007)
Processing Steps

  1. The processing procedures discussed in IRM 8.19.5.4.1 apply to docketed cases as well as nondocketed cases. In addition, after establishing the controls as stated in IRM 8.19.5.6, forward the case file to associate area counsel for answer.

  2. If multiple petitions have been filed, advise associate area counsel at the time the case is sent for answer so that the appropriate action can be taken. Until associate area counsel advises which petition is controlling, Appeals Processing Services will control each docket number on ACDS as a key case work unit.

  3. When Appeals is notified of the controlling docket number, all other related docket numbers will be dismissed. Upon receipt of the CATS Transmittal with dismissal information, Appeals Processing Services will update ACDS as follows:

    • ACTION CODE: "ORDENT"

    • TODATE: The order entered date as indicated on the CATS transmittal

  4. When copies of the dismissals are received, Appeals Processing Services will close the dismissed docketed cases off the system. Update ACDS as follows:

    1. CLOSING CODE 08 if dismissed, Compliance field office or campus issued FPAA/FSAA and Appeals hours expended.

    2. CLOSING CODE 11 if dismissed, Appeals issued FPAA/FSAA.

    3. CLOSING CODE 21 if dismissed, Compliance field office or campus issued FPAA/FSAA and no Appeals hours expended.

    4. CLOSING DATE: Date closed.

    5. ACTION CODE: ACKCLS.

    6. TODATE AND FROMDATE: Date closed.

    7. NOTES: "Dismissed--multiple petitions filed, controlling DKT#XXXX-XX."

  5. Appeals Processing Services will place copies of the dismissals in the office file (you may need to create one at this time) and in the TEFRA key case administrative file.

8.19.5.6  (05-01-2007)
ACDS Processing

  1. Appeals Processing Services must update ACDS to reflect case level information and return level information. The information listed below in IRM 8.19.5.6.1 and IRM 8.19.5.6.2 emphasizes elements unique to TEFRA cases. See IRM 8.20.3 for up-to-date information on ACDS processing and Exhibit 8.19.5-5 for an example of a case summary card print out based on IRM 8.20.

8.19.5.6.1  (05-01-2007)
Case Level information

  1. The case level information specific to TEFRA cases that Appeals Processing Services must input on ACDS is as follows:

    1. TYPE: TEFRA for a TEFRA key entity income tax case, TEFRAI for a TEFRA investor income tax case with an open TEFRA linkage (PICF 5) or TEFRAP for a TEFRA penalty only or affected item only case.

    2. MFT: 06 for Form 1065, 02 for Form 1120-S.

    3. FEATURE CODE: Enter appropriate code, when applicable. The most common codes are:

      TS for Tax Shelter, particularly in early TEFRA years (1982-1984). However, a TEFRA case is not automatically a tax shelter case.

      SB for Subchapter S. Each subchapter S corporation case will have this feature code, whether or not it is a TEFRA entity.

      CE for CIC (Coordinated Industry Cases).

    4. KEY T/P: Always blank on TEFRA case.

    5. KEY TIN: Always blank on TEFRA case.

    6. SNTYPE: Enter one of the following codes as applicable:
      FPAA for Appeals issued FPAA
      FPAD for Compliance field office issued FPAA
      FPAS for campus issued FPAA
      FSAA for Appeals issued FSAA
      FSAD for Compliance field office issued FSAA
      FSAS for campus issued FSAA

    7. SNDATE: Date FPAA/FSAA mailed to the TMP.

8.19.5.6.2  (05-01-2007)
Return Level Information

  1. The following information represents return level information for TEFRA cases that Appeals Processing Services must input on ACDS.

    1. STATUTE CODE: Must be entered if date is blank.
      O = Open ended Partnership consent (Form 872-O)
      R = Open ended S Corporation consent (Form 872-R)
      DOCKT = pending Tax Court Case

    2. SND: Was an FPAA/FSAA issued?
      Y = yes
      N = no

    3. TAX:
      Proposed $ (Def-O/A): Refer to Exhibit 8.19.2-1
      Revised $ (Def-O/A): Refer to Exhibit 8.19.2-1

    4. PENALTY:
      Proposed $ (Def-O/A): leave blank
      Revised $ (Def-O/A): leave blank

    5. DDAMTCL:
      For AAR refer to Exhibit 8.19.2-1.

8.19.5.7  (02-08-2008)
Statute of Limitations

  1. The following general information pertains to the case processing responsibilities of Appeals Processing Services. See IRM 8.19.1.6.6 for specific information on the statute of limitations for TEFRA entities.

  2. The statute of limitations for assessment generally expires 3 years from the due date of the return (determined without regard to extensions) or the date the return was actually filed, whichever is later. See IRM 8.19.1.6.6.4.1 for exceptions to the general rule. The filing of a pass-through entity return may extend but will not shorten each partner/shareholder's period for assessment.

    1. For Form 1065, U.S. Partnership Return of Income, the due date for filing the return is 3 1/2 months after the end of the return’s taxable year. For example, the due date of a partnership return for a calendar year partnership for the taxable year ended December 31, 2002, would be April 15, 2003.

    2. For Form 1120-S, U.S. Small Business Corporation Income Tax Return, the due date for filing the return is 2 1/2 months after the end of the return’s taxable year. For example, the due date of an S corporation return for a calendar year S corporation for the taxable year ended December 31, 2002, would be March 15, 2003.

  3. The statute may be extended by the TMP. The forms used by the TMP to extend the statute are:

    1. Form 872-P for partnerships (extends the statute to a specific date)

    2. Form 872-S for S corporations (extends the statute to a specific date)

    3. Form 872-O for partnerships (open-ended extension)

    4. Form 872-R for S corporations (open-ended extension)

    Note:

    Form 872-P, Form 872-S, Form 872-O and Form 872-R must be signed, executed and dated.

  4. When the statute of limitations consent forms are executed by Appeals, update the statute date or code on ACDS.

  5. It is also important to update the AIMS statute to maintain accurate controls on AIMS and PCS. Updating AIMS automatically updates PCS. To update the AIMS statute use CC: AMSTUB.

  6. Copies of consents secured at the TEFRA entity level should be faxed to both CTFs by the appeals officer. See Exhibit 8.19.2-2.

    Note:

    A TEFRA key case should not be accepted in Appeals unless there are at least180 days remaining on the statute.

  7. Copies of TEFRA investor consents extending a TEFRA statute should be faxed to both CTFs by the appeals officer. See Exhibit 8.19.2-2.

    Note:

    A TEFRA investor case should not be accepted in Appeals unless there are at least 180 days remaining on all live one-year assessment dates for the investor if the investor is a CIC corporation, a Joint Committee case or an other corporate specialty case. Examination is responsible for computing and assessing the tax from all TEFRA linkages which have a live one-year assessment date before the case reaches Appeals for CIC corporation, Joint Committee and corporate specialty cases. The appeals team manager has discretion whether to accept an investor case with a live one-year assessment date or to return the case to Examination for computation and assessment of the live one-year assessment date before returning the case to Appeals for consideration of the non-TEFRA issues. See IRM 8.19.6.17(3) for an explanation of other corporate specialty cases.

8.19.5.8  (05-01-2007)
Case Processing During Settlement Negotiations - Appeals Processing Services, Secretaries and Clerks

  1. There are different types of actions that may be required on TEFRA key cases during settlement negotiations. Some may be applicable to either nondocketed or docketed cases.

  2. The TMP will receive copies of all correspondence relating to a partnership/S corporation key case. Secretaries and clerks, but not Processing Services, are generally responsible for this when requested by the appeals officer.

8.19.5.8.1  (02-08-2008)
Uniform Acknowledgment Letter and Conference Letters

  1. An approved uniform acknowledgment letter will be sent to the Tax Matters Partner and investors who have filed protests or petitions. The appeals team manager or his/her designee will generate and issue the uniform acknowledgment letter. The general uniform acknowledgment letter procedures in IRM 8.2.1.7 apply to these cases.

  2. Special conference letters have been prepared for use on partnership and S corporation cases subject to the unified proceedings. Secretaries and clerks, but not Processing Services, are generally responsible for preparation of or mailing of conference letters when requested by the appeals officer.

    Exhibits 8.19.5-6, 8.19.5-7, 8.19.5-8, and 8.19.5-9 are samples of the special conference letters to the TMP of the partnership, a partner, the TMP of the S corporation, and a shareholder of the S corporation.

8.19.5.8.2  (05-01-2007)
Processing Settlement Package

  1. Prior to mailing the settlement package to the investor, the appeals officer will submit the case through the area TEFRA coordinator to the appeals team manager for approval.

  2. Different procedures will be followed depending on whether the key case Campus TEFRA Function (CTF) or the Appeals Office mails the settlement package.

8.19.5.8.2.1  (05-01-2007)
Key Case Campus TEFRA Function (CFT) Mailing

  1. The settlement agreement is mailed to the TMP and the investors using a pro-forma letter as shown in Exhibits 8.19.1-24, 8.19.1-25, 8.19.1-26, 8.19.1-27, 8.19.1-28, 8.19.1-29 and 8.19.1-30. However, the appeals officer may prepare a special letter that describes the particular case settlement.

  2. If a letter is specially prepared, it must include language that makes it clear that the one-year statute date does not start until the settlement agreement is signed on behalf of the Commissioner. See Treaty Pines Investments Partnership, 967 F.2d 206 (5th Cir. 1992). This is the Treaty Pines language for special letters transmitting settlement agreements:

    "This is a binding settlement only if you sign this form and return it to us and we sign on behalf of the Commissioner of Internal Revenue . When we sign the agreement form, the one-year extension of the period of limitations on assessments will begin under Internal Revenue Code Section 6229(f)."

  3. The appeals officer will review the settlement package and forward the package for approval to the appeals team manager. The following documents will be included:

    1. Form 5402 marked "Information Only-Do Not Mail To Taxpayer " (prepared by secretary, clerk, appeals officer or Appeals Processing Services as determined locally)

    2. Appeals case memo marked "Information Only-Do Not Mail To Taxpayer."

    3. Schedule of adjustments from a Form 870-P(AD), 870-PT(AD), 870-L(AD), 870-LT(AD), or 870-S(AD).

      Caution:

      Include a complete TMP settlement form for all cases for which the TMP will bind non-notice partners.

    4. Form 886-Z(C) marked at the top or in the center of the form as follows:

      "Information Only-Do Not Mail To Taxpayer"

      "Appeals Settlement"

    5. Form 4605-A marked at top of form or in remarks as follows:

      "Information Only-Do Not Mail To Taxpayer"

      "Appeals Settlement"

  4. After the appeals team manager has approved the settlement, the appeals officer, secretary, clerk or Appeals Processing Services as determined locally will photocopy documents and assemble the CTF closing package. The appeals officer will review the closing package. Appeals Processing Services will ensure all attachments are present according to the Form 3210 and mail the Form 3210 and contents to the key case CTF by controlled mail. The following documents will be sent to the key case CTF within 15 days of the TMP’s response:

    1. Form 5402 marked "Information Only-Do Not Mail To Taxpayer " (prepared by appeals officer, secretary, clerk or Appeals Processing Services as determined locally)

    2. Appeals case memo marked "Information Only-Do Not Mail To Taxpayer."

    3. Schedule of adjustments from a Form 870-P(AD), 870-PT(AD), 870-L(AD) 870-LT(AD) or 870-S(AD).

      Note:

      Send the complete TMP settlement form for all cases for which the TMP will bind non-notice partners.

    4. Form 886-Z(C) marked at top or in center of the form as follows:
      "Information Only-Do Not Mail To Taxpayer"
      " Appeals Settlement"

    5. Instructions for penalty-affected items reports (if applicable). See IRM 8.19.5.8.3.2(3)(e).

    6. Form 4605-A marked at top of form or in remarks as follows:
      " Information Only-Do Not Mail To Taxpayer"
      "Appeals Settlement"

    7. Form 3210 including any special processing instructions (see Exhibit 8.19.4-1).

    8. Small return envelope for return of the originator’s copy of Form 3210.

    Note:

    Appeals Processing Services will determine the CTF to forward the closing package to as follows: Order a TSINQP on each year of the key case. If the TSINQP shows OSC in the CTF-CD, then the CTF is Ogden. If the TSINQP shows BSC in the CTF-CD, then order a TXMODC on the key case. If there is data, look in the "Control Base and History Information" section; if the "Assign to" column has numbers that begin with 0179, then the CTF is Brookhaven. If there are no numbers in the " Assign to" column, Ogden is the CTF.

  5. The key case CTF will prepare and mail the appropriate letters and agreement forms to the investors. The letters are computer generated on PCS along with page 1 of the agreement form and the instructions for signing, if applicable. See Exhibits 8.19.1-24 through 8.19.1-30 for sample letters. The key case CTF will:

    • photocopy the schedule of adjustments pages,

    • attach a copy of each to the investors' letters and

    • enclose a return envelope addressed to the key case CTF.

8.19.5.8.2.2  (05-01-2007)
Appeals Office Mailing

  1. In cases with a small number of investors, it may be more efficient for the Appeals Office to mail the settlement letters to the investors.

    Note:

    As noted in section 8.19.3.8.4.1(1), the preferred method of mailing the agreement forms is by the CTF and Appeals should generally be mailing agreement forms only when there are a small number of investors.

  2. If a letter is specially prepared it must include language that makes it clear that the one-year statute date does not start until the settlement agreement is signed on behalf of the Commissioner. See IRM 8.19.5.8.2.1(2) for language to include and Treaty Pines Investments Partnership , 967 F.2d 206 (5th Cir. 1992). Enclose a small return address envelope.

  3. If the Appeals Office mails the settlement, the investors' addresses should be checked for accuracy. If the 60-day letters were mailed fairly recently, the key case CTF list of names and addresses of partners who were mailed the 60-day letter may be used to verify current addresses. Otherwise, the addresses should be verified by the appeals officer through the TMP or by securing an ENMOD or INOLE print.

  4. Prepare the settlement package as shown in IRM 8.19.5.8.2.1. The letters and agreements will be prepared by either the appeals officer or the tax computation specialist. The appeals officer may write a special letter or use the pro forma letters shown in Exhibit 8.19.1-24 through Exhibit 8.19.1-30.

    Note:

    When the Appeals Office mails the settlement forms to the investors, the tax computation specialist must prepare a complete Form 870-P(AD), Form 870-PT(AD), Form 870-L(AD), Form 870-LT(AD) or Form 870-S(AD) must be prepared for each investor. However, if the CTF mails the settlement forms to the investors, Appeals will prepare a complete Form 870-P(AD), Form 870-PT(AD), Form 870-L(AD) Form 870-LT(AD) or Form 870-S(AD) only for the TMP agreement when the TMP will bind non-notice partners. If the TMP will not bind non-notice partners, Appeals will prepare only a schedule of adjustments The CTF will prepare the signature page and the instructions for signing page.

8.19.5.8.3  (05-01-2007)
Receipt of Agreements

  1. Signed agreement forms will be returned to the Appeals Office or CTF that mailed the agreement forms to the investors.

    1. Key case CTF mailed agreements should generally be returned to the key case CTF.

    2. Appeals Office mailed agreements should be returned to the Appeals Office.

8.19.5.8.3.1  (05-01-2007)
Key Case Campus TEFRA Function (CTF) Receipts

  1. When the agreement forms are received by the key case CTF, they will do the following:

    1. Date stamp the agreement forms on the reverse side.

    2. Then segregate as Appeals settlements.

    3. Hold for processing by the appeals officer or manager delegated per Delegation Order No. 4-19 to approve them.

    Note:

    Docketed agreements should not be executed but instead should be sent to Appeals in compliance with Tax Court Rule 248(c).

  2. The appeals officer or appeals team manager at the CTF will review and execute the nondocketed agreement forms at the CTF. The key case CTF will then send a copy to the Appeals Office, the taxpayer and/or POA.

  3. The original nondocketed agreement form should be forwarded to the investor CTF where the investor return is held. The investor CTF will prepare the tax computations and assess the tax.

  4. The key case CTF will retain a copy of the agreement form and send a listing of all agreed investors to the TMP whether Appeals executed the agreement forms in the local office or in the CTF.

8.19.5.8.3.2  (05-01-2007)
Appeals Office Receipts

  1. When the agreement forms are received in the Appeals Office, the employee responsible for processing received mail should do the following:

    1. Date stamp the agreement forms on the reverse side.

    2. Forward the agreement forms to the appeals officer to hold until they are batched, executed and mailed to the key case CTF.

  2. Generally the appeals officer will batch the unexecuted agreement forms every 30 days and then forward them to the appeals team manager as part of the package described in (3) below for execution. The appeals officer is responsible for preparing the documents for the closing package to the CTF transmitting executed settlement agreements. The appeals officer, secretary, clerk or Appeals Processing Services as determined locally will prepare a Form 5402 and photocopy documents and assemble the closing package to the key case CTF transmitting executed settlement agreements. Appeals Processing Services will ensure all attachments are present according to the Form 3210 and send the Form 3210 and contents to the key case CTF by controlled mail.

    Note:

    This time period is critical because the execution date of the agreement starts the running of the one-year assessment date for the respective investor.

    Caution:

    Do not hold executed agreement forms in the Appeals Office for batching. The executed agreement forms must be transmitted to the key case CTF within 30 days of execution.

  3. The closing package will include:

    1. Form 5402 marked "Information Only-Do Not Mail to Taxpayer " (prepared by appeals officer, secretary, clerk or Appeals Processing Services as determined locally)

    2. Appeals case memo marked "Information Only-Do Not Mail to Taxpayer."

    3. Form 886-Z(C) marked with the one-year assessment date. Also, on the top or in the center, write "Information Only-Do Not Mail To Taxpayer " and "Appeals Settlement."

    4. Forms 870-P(AD), 870-PT(AD), 870-S(AD), 870-L(AD) or 870-LT(AD) for agreed taxpayers.

    5. Instructions for penalty and affected item reports, if applicable. (For partnership tax years beginning after August 5, 1997 penalties are determined at the Partnership level.)

    6. Form 4605-A marked with the one-year assessment date. Also, on the top or in the center, write "Information Only-Do Not Mail To Taxpayer " and "Appeals Settlement."

    7. Form 3210 with any special instructions to the key case CTF (see Exhibit 8.19.4-2)

    8. Small return envelope for return of the originator’s copy of Form 3210.

  4. The appeals officer should prepare the documents needed for a closing package to the key case CTF every 30 days transmitting executed settlement agreements (see Exhibit 8.19.4-2) until the case is fully agreed or an FPAA/FSAA is issued. If fully agreed, the appeals officer will annotate the last closing package to show it is a fully agreed case (see Exhibit 8.19.4-3). Appeals Processing Services will ensure all attachments are present according to the Form 3210 and send the Form 3210 and contents to the key case CTF by controlled mail.

  5. The appeals officer, secretary, clerk or Appeals Processing Services as determined locally will include the original Form 870-P(AD), 870-PT(AD), 870-S(AD), Form 870-L(AD), or Form 870-LT(AD) in the package to the key case CTF and retain a copy in the administrative file.

  6. The key case CTF will send a copy of the agreement to the investor and POA, if applicable, and then send a list of all agreed investors to the TMP.

  7. The one-year assessment date must be input on PCS for each investor with an executed agreement form. When the TMP and the Service execute an agreement form to bind the non-notice investors, a one-year date will be input for the TMP and all non-notice investors.

    1. Those Appeals Processing Services offices profiled for CC TSCHG may input the one-year assessment date, within 30 days of execution of the settlement agreements.

    2. For all other offices, PCS will be updated by the key case CTF when the executed agreement forms are received. It is important that the appeals officer include the correct one-year assessment date on the Form 3210 transmitting the agreement forms to the key case CTF and request the CTF to update the one-year assessment dates on PCS.

    Caution:

    The one-year assessment date begins on the date the form is executed. Add one year to the date the form is executed and then subtract one day. For example, an agreement form executed on July 2,1999 has a one-year assessment date of July 1, 2000.

8.19.5.8.3.3  (05-01-2007)
Partial Agreements

  1. Settlement agreements may be either partial settlement agreements or full settlement agreements. See IRM 8.19.3.7.3, Exhibit 8.19.3-3, and Exhibit 8.19.4-4 for more information on partial agreements.

    Note:

    For settlements in docketed cases, see IRM 8.19.5.13.

8.19.5.9  (05-01-2007)
FPAA/FSAA – Appeals Processing Services, Secretaries and Clerks

  1. Whenever a settlement offer has not been accepted by all of the investors, an FPAA/FSAA must be issued to the TMP, whether or not the TMP agreed, and to those investors who have not agreed.

  2. The FPAA/FSAA is similar to the notice of deficiency. However, only partnership or S corporation adjustments are identified (does not apply to S corporations beginning after December 31, 1996).

    1. The FPAA/FSAA is prepared by the tax computation specialist showing the partnership or S corporation adjustments at the key case level.

  3. Penalties and other affected items are subject to deficiency procedures at the investor level after the partnership issues have been resolved.

    Note:

    For partnership tax years ending after August 5, 1997, penalties are determined at the partnership level and will be addressed on the FPAA, if applicable. Other affected items are subject to deficiency procedures at the investor level after the partnership issues have been resolved.

8.19.5.9.1  (05-01-2007)
Preparation

  1. After the tax computation specialist prepares the FPAA package documents at the request of the appeals officer, the appeals officer will review the documents prepared by the tax computation specialist. The appeals officer, secretary, clerk, or Appeals Processing Services as determined locally will prepare a Form 5402 and will photocopy documents and assemble the FPAA package as described in the paragraphs (2) through (7) below.

  2. Two undated original Letters 1830 (FPAA)/Letter 1828 (FSAA) as follows:

    1. FPAA/FSAA to "The Tax Matters Partner/Person" (do not use the actual name) at the partnership/S corporation address shown on the partnership/S corporation return. If the address of the partnership/S corporation was updated according to Treasury Reg. section 301.6223(c)-1, use the updated address.

    2. FPAA/FSAA to the named TMP at the TMP's last known address and the address which will most likely reach the TMP.

  3. The Schedule of Adjustments page of Form 870-P, 870-PT or Form 870-S. A complete Form 870-P, 870-PT, or 870-S for the generic TMP and the named TMP.

  4. FPAA/FSAA explanation of adjustments.

    Note:

    For partnership tax years ending after August 5, 1997 penalties will be determined at the partnership level and included on the FPAA.

  5. When applicable, the tax computation specialist will prepare a separate information statement of applicable penalties, affected items or IRC 6621(c) interest, clearly marked "FOR INFORMATION ONLY" (see Exhibit 8.19.4-23).

    1. This page will not be numbered as a part of the FPAA/FSAA. It will be included in the package to be mailed to the investors with the FPAA/FSAA for information.

    Note:

    For partnership tax years ending after August 5, 1997 penalties will be determined at the partnership level. See Exhibit 8.19.4-22.

  6. Form 3210, Document Transmittal, is used to transmit the FPAA/FSAA closing package to the key case CTF.

    1. If the Appeals Office will mail the FPAA/FSAA to the TMP and the key case CTF will prepare and mail it to the investors, see Exhibit 8.19.4-5 for a sample Form 3210. Appeals Processing Services is responsible for issuing FPAAs/FSAAs as requested by the appeals officer and for mailing the FPAA/FSAA closing package to the key case CTF via controlled mail Form 3210.

    2. If the key case CTF will mail the FPAA/FSAA to the TMP, the CTF will prepare and mail it the investors. See Exhibit 8.19.4-6 for a sample Form 3210. Appeals Processing Services is responsible for issuing the FPAAs/FSAAs as requested by the appeals officer and for mailing the FPAA/FSAA closing package to the key case CTF via controlled mail Form 3210.

  7. Other documents as necessary.

  8. After the FPAA/FSAA package is finished, the administrative file and FPAA/FSAA package will be returned to the appeals officer for review. The appeals officer will forward the case through the area TEFRA coordinator, to the appeals team manager for review and approval.

8.19.5.9.2  (05-01-2007)
Issuance

  1. Either the Appeals Office Appeals Processing Services or Key Case CTF will issue the FPAA/FSAA to the TMP.

  2. At least 45 days must remain on the statute when the key case CTF receives the FPAA/FSAA closing package.

  3. Allow sufficient time for the processing and mailing of packages by Appeals Processing Services.

8.19.5.9.2.1  (05-01-2007)
Appeals Office Appeals Processing Services Mails to TMP

  1. If there are 45 days or less remaining on the statute, the appeals team manager will contact the TEFRA coordinator at the key case CTF to determine who will issue the FPAA/FSAA to the TMP.

  2. If Appeals Processing Services issues the FPAA/FSAA to the TMP because of a short statute, Appeals Processing Services will follow the procedures in paragraphs (3) through (5) below.

  3. After approval by the appeals team manager or appeals team case leader, Processing Services will date and send by certified mail all original FPAAs/FSAAs included in the FPAA/FSAA package. There should generally be a minimum of two letters addressed to the TMP as described in IRM 8.19.5.9.1(2).

  4. Processing Services will also mail, but not by certified mail, one copy of Letter 1830 or Letter 1828 to the TMPs power of attorney on record (if applicable).

    Caution:

    Power of attorney must be valid for TEFRA. See IRM 8.19.2.15.2(3).

  5. Within 5 working days after Appeals Processing Services issues the FPAA/FSAA to the TMP, Appeals Processing Services will send the FPAA/FSAA closing package described in IRM 8.19.5.9.2.2 to the key case CTF by controlled correspondence, using Form 3210. Appeals Processing Services will include three dated copies of each FPAA/FSAA sent to the TMP and a copy of the certified mailing list or a copy of other proof of certified mailing.

  6. Appeals Processing Services will notate on the Form 3210 the date the FPAA/FSAA was mailed to the TMP. See Exhibit 8.19.4-5 for a sample Form 3210. The key case CTF has 60 days from the date the FPAA/FSAA was mailed to the TMP to mail notices to the investors so it is critical that Appeals Processing Services sends the closing package to the key case CTF within 5 working days of issuing to the TMP.

8.19.5.9.2.2  (05-01-2007)
Key Case Campus TEFRA Function (CTF) Mails to TMP

  1. If there are more than 45 days remaining on the statute, the FPAA/FSAA package should contain the following:

    1. One original Letter 1830 (Notice of Final Partnership Administrative Adjustment) or Letter 1828 (Notice of Final S corporation Administrative Adjustment) addressed to the "The Tax Matters Partner/Person" . See IRM 8.19.5.9.1(2)(a). (Prepared by the tax computation specialist).

    2. One original Letter 1830 or Letter 1828 addressed to the named TMP. See IRM 8.19.5.9.1(2)(b). (Prepared by the tax computation specialist.)

    3. One copy of Letter 1830 or Letter 1828 to the power of attorney on record (if applicable) (Prepared by the tax computation specialist.).

      Caution:

      Power of attorney must be valid for TEFRA. See IRM 8.19.2.15.2(3).

    4. One copy of Form 870-P, Form 870-PT or Form 870-S, a schedule of adjustments and an explanation of adjustments per each original letter and copy of the letter to the TMP. (Prepared by the tax computation specialist.)

    5. One copy of Form 886-Z(C) listing each unagreed investor. At the top or in center, write "Information Only-Do Not Mail to Taxpayer. " (Prepared by the tax computation specialist.)

    6. A completed Form 4605-A. At the top or in center, write " Information Only-Do Not Mail to Taxpayer." (Prepared by the tax computation specialist.)

    7. One copy of the signed Form 5402 (prepared by appeals officer, secretary, clerk or Appeals Processing Services as determined locally at the request of the appeals officer).

    8. One copy of the Appeals case memo. Write "Information Only-Do Not mail to Taxpayer." (Copied by a secretary or clerk at the request of the appeals officer).

    9. Explanation of penalties and/or affected items marked " For Information Only," if applicable. (Prepared by the tax computation specialist.)

    10. Two return address envelopes or return address labels with the Appeals Office address.

  2. Appeals Processing Services is responsible for mailing the FPAA/FSAA closing package to the key case CTF by controlled correspondence, using Form 3210. See Exhibit 8.19.4-6.

  3. Appeals Processing Services will update ACDS as described in IRM 8.19.5.9.3.1.

8.19.5.9.3  (05-01-2007)
Monitoring FPAA/FSAA

  1. Appeals Processing Services will take the following steps to monitor the FPAA/FSAA.

    1. Maintain a copy of the FPAA/FSAA package and Form 3210 in the administrative file.

    2. If the key case CTF will issue the FPAA/FSAA, place the file in suspense until Appeals receives verification that the CTF issued the FPAA/FSAA’s.

    3. Appeals Processing Services should monitor the return of the Form 3210 from the key case CTF. If the Form 3210 is not returned by the key case CTF within 45 days, Appeals Processing Services should follow up with the CTF to ensure the FPAA closing package was received and that the acknowledged Form 3210 is returned by the CTF. If Appeals Processing Services determines the CTF did not receive the FPAA closing package, Appeals Processing Services will notify the appeals team manager immediately.

  2. The Docketed Inventory Management System (DIMS) is used to monitor the FPAA/FSAA as well as statutory notices of deficiency. DIMS is a sub-system of ACDS, as described in IRM 8.20.3.1(4).

8.19.5.9.3.1  (05-01-2007)
Updating ACDS Controls

  1. When Appeals receives verification (acknowledged Form 3210 and a copy of the Certified Mailing List) from the key case CTF that the FPAA/FSAA has been mailed to the TMP or when Appeals mails the FPAA/FSAA to the TMP, Appeals Processing Services will take the following actions:

    1. On ACDS, update the SNTYPE field with "FPAA or FSAA."

    2. On ACDS, update the SNDATE field using the FPAA/FSAA mailed date from the Certified Mailing List. The SN Expires date will be computer generated.

    3. Place the original dated verification in the administrative file.

    4. Place a copy of the dated verification in the office file.

    5. Place the administrative file in the FPAA/FSAA suspense file.

8.19.5.9.4  (05-01-2007)
Notification When Petitioned to the Tax Court

  1. A petition may be filed with the Tax Court, U.S. Court of Federal Claims or a federal district court. The procedures discussed here apply to cases petitioned to the Tax Court only. If a petition is filed with either the U.S. Court of Federal Claims or a district court, see IRM 8.19.5.17.

  2. When the petition is received from associate area counsel, Appeals Processing Services will retrieve the key case administrative file, check the petition for accuracy, update ACDS as described below and forward the case file to associate area counsel for answer and trial.

  3. If only one petition is filed, Appeals Processing Services will update ACDS with the following case level information:

    • Docket number

    • Counsel office

    • Attorney

    • Closing code 43

    • Date Closed for trial preparation to associate area counsel

    • Enter ACTION code DCJUR

    • TODATE of the date the case forwarded to associate area counsel

  4. In addition, update ACDS with the following return level information:

    • Remove statute date from STATDATE field

    • Enter statute code: DOCKT

  5. If multiple petitions have been filed, see IRM 8.19.5.5.1.

  6. Appeals Processing Services will update AIMS using CC:AMSTUB to Status "82."

  7. Appeals Processing Services will notify the key case CTF of the petition, including the docket number and the date the petition was filed.

  8. In accordance with local procedures, Appeals Processing Services will notify the appeals officer and appeals team manager that the case has been petitioned.

8.19.5.9.5  (05-01-2007)
Identification of Defaulted Cases

  1. Appeals Processing Services will monitor the docket lists referred to in IRM 8.19.5.9.3(2). If a petition has not been identified within 180 days, Appeals Processing Services will default the case, following procedures in IRM 8.19.5.12.

  2. Notification of a default may also come from the key case CTF if they issued the FPAA/FSAA to the TMP.

8.19.5.10  (05-01-2007)
Procedures for No Change Cases – Appeals Processing Services, Secretaries and Clerks

  1. No change cases occur when the appeals officer accepts the partnership or S corporation return as filed.

  2. If a no change is recommended, either a "No Change" FPAA/FSAA should be issued or a "No Change" settlement agreement should be secured from all investors.

8.19.5.10.1  (05-01-2007)
No Change FPAA/FSAA

  1. The appeals officer is responsible for requesting the tax computation specialist to prepare documents for a no change FPAA/FSAA package. the tax computation specialist will prepare the package documents as follows:

    1. Prepare, but do not date, two original Letters 1828 (FPAA) or Letters 1830 (FSAA).

    2. Address an FPAA/FSAA to "The Tax Matters Partner/Person " (do not use the actual name) at the partnership/S corporation address shown on the partnership/S corporation return. If the address of the partnership/S corporation was updated according to Treasury Reg. 301.6223 (c)-1, use the updated address.

    3. Address an FPAA/FSAA to the named TMP at the TMP's last known address and the address which will most likely reach the TMP (unless the identify of the named TMP is uncertain).

  2. The tax computation specialist is responsible for preparing Form 3210, Document Transmittal, to forward the package to the Key Case CTF.

    1. If Appeals Processing Services will mail the "No Change " FPAA/FSAA to the TMP and the key case CTF will mail it to the investors, see Exhibit 8.19.4-7.

    2. If the key case CTF will mail the FPAA/FSAA to the TMP and the investors, see Exhibit 8.19.4-8.

  3. The tax computation specialist will prepare all other documents as necessary.

  4. The tax computation specialist will return the administrative file and the "No Change" FPAA/FSAA package documents to the appeals officer for review. The appeals officer, secretary, clerk or Appeals Processing Services as determined locally at the request of the appeals officer, will prepare a Form 5402 and photocopy documents and assemble the FPAA/FSAA package. The appeals officer will forward the case and FPAA/FSAA package through the area TEFRA coordinator to the appeals team manager for review and approval.

  5. The procedures for issuing a "No Change" FPAA/FSAA are the same as the procedures for issuing an FPAA/FSAA. See IRM 8.19.5.9.2. Appeals Processing Services is responsible for issuing the FPAA/FSAA as requested by the appeals officer and for mailing the FPAA/FSAA package to the CTF.

  6. The procedures for monitoring a "No Change" FPAA/FSAA are the same as the procedures for monitoring an FPAA/FSAA. See IRM 8.19.5.9.3, 8.19.5.9.4 and 8.19.5.9.5. Appeals Processing Services is responsible for monitoring the FPAA/FSAA and defaulting an FPAA/FSAA if appropriate.

8.19.5.11  (02-08-2008)
Case Closings – Appeals Processing Services

  1. Closing procedures vary, depending upon whether all investors have agreed, the case is tried, or an FPAA/FSAA defaulted.

    Caution:

    The key case cannot be closed until the final disposition of all investors is determined.

  2. The TMP can bind only non-notice partners to partnership items. The TMP binds non-notice partners only if the agreement so states. See IRC 6224(c)(3)(A)(ii). Partnerships with 100 or fewer partners do not have non-notice partners. The TMP cannot bind a non-notice partner to partner-level issues.

  3. A pass-thru partner binds indirect partners when the pass-thru partner enters into a settlement agreement. No extra language is needed for the pass-thru partner to bind the indirect partners. See IRC 6224(c)(1). The pass-thru partner cannot bind an indirect partner to individual level issues.

  4. The TMP cannot bind notice partners to partnership items, and cannot bind notice, non-notice or indirect partners to affected items. Therefore, every notice partner must sign a Form 870-P(AD), Form 870-PT(AD), Form 870-L(AD), or Form 870-LT(AD) to avoid issuance of an FPAA. Every direct partner in a partnership with 100 or fewer partners is a notice partner.

    Note:

    All direct shareholders in a TEFRA S corporation are notice shareholders and the TMP cannot bind any shareholder except itself. Therefore every shareholder in a TEFRA S corporation must sign a Form 870-S(AD) to avoid issuance of an FSAA.

  5. For pass-through entity tax years ending before August 6, 1997, if penalties have been included in a settlement, a key case can be closed fully agreed if all investors agree to the pass-through entity items even though the penalty issues are not fully agreed.

    1. All investors must sign either the Form 870-P(AD), Part I of the Form 870-L(AD), or a Form 870-S(AD).

    2. The unagreed penalty adjustments will be raised at the investor level using deficiency procedures after the pass-through entity adjustment has been made.

  6. For partnership tax years ending after August 5, 1997 the applicability of penalties is determined at the partnership level. A key case can be closed fully agreed if all partners agree to the partnership items and the penalty issues at the partnership level. A case cannot be closed fully agreed if any partner did not agree to the penalty issues at the partnership level. If any partner did not agree to the penalty issues at the partnership level, an FPAA must be issued. Penalties will be assessed by the investor CTF without issuance of a statutory notice, even if the deficiency upon which the penalty is imposed requires an affected item notice of deficiency. Investors can contest the assessed penalties by filing a claim for refund. The case can be closed as discussed in paragraph (5) above.

  7. Appeals Processing Services will maintain office files on TEFRA key cases. The office file should include copies of the following items:

    1. RAR Form 4605 or 4605-A

    2. RAR Form 886-Z(C)

    3. Key case appeals case memorandum or counsel settlement memorandum, as applicable

    4. Penalty/affected item appeals case memorandum (if applicable) marked "Information Only - Do Not Mail to Taxpayer"

    5. Appeals Form 886-Z(C) marked with the one-year assessment date. At the top or in the center of the form, write "Information Only-Do Not Mail to Taxpayer." Also write "Appeals Settlement, " "Counsel Settlement," "FPAA," or "Tried," as appropriate.

    6. All controlled correspondence to the CTF (Forms 3210) - receipted copy only

    7. Form 8339 (PCS change input for one-year assessment date and dollars assessed for this TEFRA adjustment), according to local procedures

    8. Form 5402 (prepared by appeals officer, secretary, clerk or Appeals Processing Services as determined locally)

    9. All agreement Forms 870-P, 870-P-(AD), 870-PT, 870-PT(AD), 870-L, 870-L(AD), 870-LT, 870-LT(AD), 870-S or 870-S(AD), or closing agreements for all investors who agreed.

      Note:

      Although Forms 870-L and 870-LT are not used by Appeals, if any investor agreed in Examination, these forms would have been in the administrative file when the case arrived in Appeals.

    10. Decision document for docketed cases

    11. Closing letter to the TMP prepared by the appeals officer, if applicable

    12. Appeals Form 4605-A marked with the one-year assessment date. At the top or in the remarks section of the form, write "Information Only-Do Not Mail to Taxpayer." Also write "Appeals Settlement, " "Counsel Settlement," "FPAA," or "Tried," as appropriate.

    13. Form 5403 (prepared by Appeals Processing Services).

    14. Copies of all entity statute extensions

    15. Certified mailing list of notices

    Note:

    The longer than usual retention period for office files is necessary because of the time span required for the CTFs to make final tax assessments resulting from adjustments to partnership items and affected items. Also, having the office files available will be helpful when receiving inquiries regarding settlements from other Appeals offices or the campuses and critical when receiving collection questions for the investors from other Appeals offices.

    Reminder:

    The TEFRA case office files are purged and destroyed 6 years after the end of the fiscal year in which the case is closed or when determined to be no longer needed. TEFRA key case office files should be maintained at least 6 years.

  8. Depending upon local procedures, either Appeals Processing Services or Tax Computation Specialists will compute the estimated revised deficiency. See IRM 8.19.2.6 and Exhibit 8.19.2-1. Revised dollars are entered on ACDS only when the TEFRA key case is closed.

8.19.5.11.1  (05-01-2007)
Agreed Case Closing

  1. In fully agreed cases, the key case CTF will have received all executed agreement forms and processed them, as noted in IRM 8.19.5.8.3.

  2. The appeals officer will close the key case through the appeals team manager to Appeals Processing Services as fully agreed.

8.19.5.11.2  (05-01-2007)
Preparing Administrative File

  1. Appeals Processing Services will ensure the following are included in the key case administrative file:

    1. Copies of all agreement forms signed by investors, including Forms 906, and/or a decision document, including agreement forms signed before the case came to Appeals.

    2. Closing letter to the TMP, prepared by the appeals officer.

    3. Form 5402, which has been signed and dated by the appeals officer and appeals team manager or appeals team case leader. The appeals officer will include any pertinent information and special instructions in the remarks section.

    4. Appeals case memo (ACM).

    5. Penalty/affected item appeals case memorandum (if applicable) marked "Information Only - Do Not Mail to Taxpayer."

    6. Form 886-Z(C) or equivalent, marked with the one-year assessment date. At the top or in the center of the form write, "Information Only-Do Not Mail to Taxpayer" and "Appeals Settlement. "

    7. Form 4605-A, marked with the one-year assessment date. At the top or in the remarks section write, "Information Only-Do Not Mail to Taxpayer" and "Appeals Settlement."

    8. Form 5403 prepared by Appeals Processing Services. See Exhibit 8.19.5-10.

  2. Appeals Processing Services will date and mail the closing letter to the TMP and include a copy of the dated letter in the key case administrative file.

  3. Appeals Processing Services will place copies of all of the documents listed in paragraph (1) above in the Appeals Office closed file. In addition, put the following in the office closed file:

    1. Copies of all receipted and acknowledged Forms 3210 which list the documents that have been sent to the key case CTF.

    2. Copies of all entity statute extensions.

  4. Appeals Processing Services will code the Appeals Office closed file to be retained at least 6 years after the fiscal year in which the case is closed.

8.19.5.11.3  (05-01-2007)
Updating ACDS

  1. Appeals Processing Services will update ACDS as follows:

    • Closing Code 03 and date closed

    • ACTION--ACKCLS & TODATE

    • Revised tax

    • Paycode 7

  2. Appeals Processing Services will complete the processing of the administrative file .

8.19.5.12  (05-01-2007)
Defaulted Cases

  1. A case should be defaulted if the case is not on the FPAA/FSAA petition list or petitions are not received during the 150-day period.

  2. Allow an additional 30 days before defaulting the case.

  3. Appeals Processing Services will prepare and mail the default closing package to the key case CTF by 195 days after the issuance of the FPAA/FSAA to the TMP unless the FPAA/FSAA is petitioned.

8.19.5.12.1  (05-01-2007)
Preparing Key Case Administrative File for Default

  1. Appeals Processing Services will prepare the Form 3210 and compile the documents needed for the default closing package. Appeals Processing Services will then return the case to the appeals officer. The appeals officer will review the closing package and is ultimately responsible for the accuracy and completeness of the Form 3210, including the one-year assessment date. Appeals Processing Services will mail the closing package to key case CTF and will notify the CTF by remark on Form 3210 to make assessments against all investors. See Exhibit 8.19.5-11.

  2. Appeals Processing Services will complete Form 5402 for the approval of the appeals processing team manager. The following information must be included:

    • Name of key case

    • TIN of key case

    • Tax periods

    • Date 150 day period expired

    • One-year assessment date

  3. Appeals Processing Services will research PCS/AIMS for PICF code. The PICF code appears on an AMDIS/AMDISA.

    1. If the PICF code is 1, Appeals Processing Services will complete Form 5403 according to local procedures.

    2. If the PICF code is 5, Appeals Processing Services will forward the case to the key case CTF by controlled mail (Form 3210). Do not prepare a Form 5403.

      Note:

      Appeals Processing Services will determine the CTF to forward the case with a PICF code of 5 as follows: Order a TSINQP on each year of the key case. If the TSINQP shows OSC in the CTF-CD, then the CTF is Ogden. If the TSINQP shows BSC in the CTF-CD, then order a TXMODC on the key case. If there is data, look in the " Control Base and History Information" section; if the " Assign To" column has numbers that begin with 0179, then the CTF is Brookhaven. If there are no numbers in the "Assign to" column, then Ogden is the CTF.

      Note:

      Appeals Processing Services will update the AIMS database to status 34. Appeals Processing Services will also update the PBC to 295 (for the Brookhaven CTF) or 398 (for the Ogden CTF). Appeals Processing Services will prepare Form 3198, Special Handling Notice, for the investor case. In the Special Handling Section check the "Other " box and enter the following--"Related TEFRA Examination open. After partial closing, forward to CTF." Appeals Processing Services will follow the normal ACDS closing procedures using the appropriate "action," "closing codes" and " to and from dates." Appeals Processing Services will forward the administrative file via Form 3210 to the CTF. Appeals Processing Services will ensure a copy of the input Form 5403 is attached to the face of the return. The CTF will place the file in suspense awaiting the outcome of the TEFRA examination.

  4. Appeals Processing Services will maintain copies of all documents listed in paragraphs (1) to (3) above in the Appeals Office closed file. Appeals Processing Services will also include in the closed file the following:

    1. Copies of all Forms 3210 listing the documents that have been sent to the key case CTF.

    2. FPAAs sent to all addresses.

    3. The certified mailing list.

    4. Copies of Appeals Forms 4605-A marked with the one-year assessment date. Written at the top of the form or in the remarks section should be the statements "Information Only-Do Not Mail to Taxpayer" and " FPAA."

    5. Copies of Appeals Forms 886-Z(C) marked with the one-year assessment date. Written at the top of the form or in the center should be the statements "Information Only-Do Not Mail to Taxpayer" and " FPAA."

    6. RAR Form 4605-A.

    7. RAR Form 886-Z(C).

    8. Copies of all settlement agreements signed by partners.

    9. All statute extensions for the key case entity.

    10. Appeals Case Memorandum (ACM).

    11. Affected item ACM (if applicable).

8.19.5.12.2  (05-01-2007)
Updating ACDS

  1. Appeals Processing Services will update ACDS as follows:

    • Closing Code--05 & date closed

    • ACTION--ACKCLS & TODATE

    • Revised tax

    • Paycode 7

    • STATDATE - enter the one-year assessment date from the Form 3210

8.19.5.12.3  (02-08-2008)
Mailing Default Package to Key Case Campus TEFRA Function (CTF)

  1. After Appeals Processing Services prepares the default closing package and it is reviewed by the appeals officer, Appeals Processing Services will forward the default closing package to the key case CTF via controlled correspondence (Form 3210). See Exhibit 8.19.5-11. Appeals Processing Services will send the default closing package to the key case CTF by 195 days after of the issuance of the FPAA/FSAA to the TMP unless the FPAA/FSAA is petitioned.

  2. For pass-through entity tax years beginning before August 6, 1997, if any penalties are to be imposed, Appeals Processing Services will send the key case CTF the penalty Appeals case memo. Also Appeals Processing Services will send the key case CTF the explanatory paragraphs to be used if the key case CTF later needs to issue a statutory notice of deficiency.

  3. For partnership tax years ending after August 5, 1997, the applicability of penalties is determined at the partnership level. The FPAA includes penalties, if applicable. Appeals Processing Services will include instructions to the key case CTF for affected items other than penalties.

8.19.5.12.4  (05-01-2007)
Processing and AIMS Closure

  1. Appeals Processing Services should monitor the return of the Form 3210 from the key case CTF. If the Form 3210 is not returned by the CTF within 45 days, Appeals Processing Services should follow up with the CTF to ensure the default closing package was received and that an acknowledged Form 3210 is returned by the CTF. After Appeals Processing Services receives the acknowledged Form 3210 from the key case CTF, it will complete the processing and AIMS closure.

8.19.5.13  (05-01-2007)
Docketed Cases

  1. A case docketed before the Tax Court may be closed as a result of a Counsel or Appeals settlement, dismissal for lack of jurisdiction, dismissal for lack of prosecution or a rendered final decision.

  2. If some or all investors settle during docketed status, Tax Court rules require that certain documents be prepared and served on the TMP. The appeals officer or associate area counsel attorney will provide instructions for processing these cases (see IRM 8.19.3.12).

    Note:

    When settling with a partner in a docketed case, the Service must comply with Tax Court Rule 248(c). Therefore, when Appeals executes a settlement agreement, Appeals must immediately notify area counsel of the settlement to comply with Rule 248(c). Area counsel must then file a Rule 248(c) notice within seven (7) calendar days after the settlement agreement is executed.

  3. Investors who settle will sign one of the following agreement forms:

    • Form 870-P

    • Form 870-P(AD)

    • Form 870-PT

    • Form 870-PT(AD)

    • Form 870-L

    • Form 870-L(AD)

    • Form 870-LT

    • Form 870-LT(AD)

    • Form 870-S

    • Form 870-S(AD)

  4. These agreement forms will be processed by the key case CTF following the procedures shown in IRM 8.19.5.8.3.2.

8.19.5.13.1  (05-01-2007)
Preparing Administrative File

  1. Appeals Processing Services will process the administrative file and AIMS close after trial, full settlement, or dismissal, if the PICF code is 1.

  2. Appeals Processing Services will ensure that the following documents are prepared and are in the file at the time of closing:

    1. A copy of the FPAA/FSAA issued to the TMP.

    2. A copy of the certified mailing list.

    3. A copy of the Tax Court petition.

    4. Dated/entered decision (or motion and decision).

    5. Counsel settlement memorandum (if applicable).

    6. Stipulation signed by the TMP (Tax Court Rule 248(a) only).

    7. Form 5402 (prepared by appeals officer, secretary, clerk or Appeals Processing Services as determined locally) marked "Information Only-Do Not Send to Taxpayer" (highlighted in yellow). Complete Item 11 as shown in Exhibit 8.19.5-12.

    8. Appeals case memo marked "Information Only-Do Not Mail to Taxpayer" (highlighted in yellow).

    9. Appeals Form 886-Z(C) marked at the top of each page with the one-year assessment statute date. Also, "Information Only-Do Not Mail To Taxpayer" should be notated at the top or in the center of each page of the form. Also, "Appeals Settlement," " Counsel Settlement" or "Tried," should be notated on each page, as appropriate.

    10. Appeals Form 4605-A — The one-year assessment statute date should be notated at the top of each page or in the remarks section. " Information Only-Do Not Mail To Taxpayer" should also be notated at the top or in the remarks section of the form. Also, "Appeals Settlement," "Counsel Settlement" or " Tried," should be notated, as appropriate.

    11. RAR Form 4605-A

    12. RAR Form 886-Z(C)

    13. Form 5403— If the PICF code is 1, prepare according to local procedures. See Exhibit 8.19.5-13 for a tried case.

    14. Form 3210— If the PICF code is 5, prepare according to local procedures to send the case to the CTF by controlled mail (Form 3210). Do not prepare a Form 5403. See IRM 8.19.5.12.1(3)(b) for processing instructions.

    15. Penalty/affected item Appeals case memo (if applicable) marked " Information Only-Do Not Mail to Taxpayer."

    16. Copies of all agreement forms signed by investors (if any).

    17. Copies of all Forms 3210 to a CTF.

8.19.5.13.2  (05-01-2007)
Package to Key Case Campus TEFRA Function (CTF)

  1. Appeals Processing Services will send the docketed case closing package (prepared by either the appeals officer or the tax computation specialist) to the key case CTF before processing and AIMS closing.

  2. The key case CTF will update the one-year assessment statute date on PCS. This date must be on the Form 3210 as shown in Exhibit 8.19.4-9.

8.19.5.13.3  (05-01-2007)
Updating ACDS

  1. Appeals Processing Services will input the appropriate Closing Code:

    • Closing Code 08--docketed Appeals settlement

    • Closing Code 10-- Counsel settled

    • Closing Code 11--dismissed for lack of jurisdiction

    • Closing Code 12-- dismissed for lack of prosecution

    • Closing Code 17--tried case

  2. Appeals Processing Services will input the following:

    • ACTION ACKCLS & TODATE

8.19.5.13.4  (05-01-2007)
Closing Case for Processing and AIMS Closing

  1. After Appeals Processing Services receives the Form 3210 acknowledging that the key case CTF received the docketed case closing package, if the PICF code is 1, Appeals Processing Services will process the key case administrative file and AIMS close.

  2. After Appeals Processing Services receives the Form 3210 acknowledging that the key case CTF received the docketed case closing package, if the PICF code is 5. Refer to IRM 8.19.5.12.1(3)(b) for processing instructions.

8.19.5.14  (05-01-2007)
Tax Court Decision Is Appealed to the Circuit Courts

  1. If a partner or the government appeals the decision of the Tax Court, associate area counsel will return the case to Appeals for interim processing.

  2. After notification of the appeal is received, Appeals Processing Services will update the remarks section of ACDS. Appeals Processing Services will return the case to the appeals officer to prepare and transmit a closing package to the CTF. See IRM 8.19.3.14.7.4 and Exhibit 8.19.4-10.

  3. The appeals officer or the tax computation specialist will prepare the documents for a Tax Court decision appealed closing package to the key case CTF instructing CTF to assess the partners in accordance with the Tax Court decision. The appeals officer, secretary, clerk or Appeals Processing Services as determined locally will prepare a Form 5402 and photocopy documents to make a Tax Court decision appealed closing package for the CTF. Appeals Processing Services will mail the package to the CTF. When Appeals Processing Services receives an acknowledgment of Form 3210 from CTF, Appeals Processing Services will send the case to associate area counsel to forward to Department of Justice for continued litigation.

    Note:

    Appeals Processing Services will monitor the return of the Form 3210 from the key case CTF. If the Form 3210 is not returned by the CTF within 45 days, Appeals Processing Services will follow up with the CTF to ensure the closing package was received and that an acknowledged Form 3210 is returned by the CTF.

  4. Update ACDS with ACTION APPEALED & TODATE

8.19.5.15  (05-01-2007)
After Final Tax Court Decision or Counsel Settlement

  1. When the decision of the Tax Court is final, associate area counsel will return the case to Appeals for preparation for closing as a tried case or a Counsel settlement case.

  2. When the decision becomes final (generally 90 days after the Tax Court entered the decision), Appeals Processing Services will update the statute on ACDS to reflect the one-year assessment statute date. Then Appeals Processing Services will return the case to the appeals officer to prepare and transmit a closing package to the CTF. See IRM 8.19.3.14.7.3 and Exhibit 8.19.4-9.

  3. The appeals officer or the tax computation specialist will prepare the documents for a final Tax Court decision closing package to the key case CTF. The appeals officer, secretary, clerk or Appeals Processing Services as determined locally will prepare a Form 5402 and photocopy documents to make a final Tax Court decision closing package for the CTF. Appeals Processing Services will mail the package to the CTF. When Appeals Processing Services receives an acknowledgment of Form 3210 from the CTF, Appeals Processing Services will process the administrative file and AIMS close the case. See IRM 8.19.5.13 for processing instructions.

    Note:

    Appeals Processing Services will monitor the return of the Form 3210 from the CTF. If the Form 3210 is not returned by the CTF within 45 days, Appeals Processing Services will follow up with the CTF to ensure the package was received and that an acknowledged Form 3210 is returned by the CTF.

  4. Appeals Processing Services will ensure that the documents listed in IRM 8.19.5.13.1(2) are prepared and are in the file at the time of closing.

8.19.5.16  (05-01-2007)
After Final Decision from the Appeal of a Tax Court Decision

  1. When the decision of the appellate court is final, the Department of Justice will return the case to Appeals through associate area counsel to prepare the case for closing.

  2. When the decision becomes final, Appeals Processing Services will update the statute on ACDS to reflect the one-year assessment date. Then Appeals Processing Services will return the case to the appeals officer to prepare and transmit a closing package to the CTF. See IRM 8.19.3.14.7.5 and Exhibit 8.19.4-11.

  3. The appeals officer or the tax computation specialist will prepare the documents for a final court decision after appeal of a Tax Court decision closing package to the key case CTF. The appeals officer, secretary, clerk or Appeals Processing Services as determined locally will prepare a Form 5402 and photocopy documents to make a final Tax Court decision closing package for the CTF. Appeals Processing Services will mail the closing package to the CTF. When Appeals Processing Services receives an acknowledgment of the Form 3210 from CTF, Appeals Processing Services will process the administrative file and AIMS close the case. See IRM 8.19.5.13 for processing instructions.

    Note:

    Appeals Processing Services will monitor the return of the Form 3210 from the CTF. If the Form 3210 is not returned by the CTF within 45 days, Appeals Processing Services will follow up with the CTF to ensure the package was received and that an acknowledged Form 3210 is returned by the CTF.

  4. Appeals Processing Services will ensure that the documents listed in IRM 8.19.5.13.1(2) are prepared and are in the file at the time of closing. In addition, the file should contain a copy of the final decision of the appeals court.


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