Son of Boss Settlement Initiative FAQs - Additional Questions

Notice: Historical Content
This is an archival or historical document and may not reflect current law, policies or procedures.

Q-Misc.1. The audit is still in process for unrelated issues. The taxpayer submitted an election to participate in the settlement initiative. How should the revenue agent proceed?

A-Misc.1. The case should be treated as a partially agreed case and the settlement should be processed following the same time requirements under the announcement. A partial agreement should be obtained with appropriate modification to the closing agreement language for a partial agreement. The taxpayer retains their Appeal rights for the unrelated issues if they are unagreed.

Q-Misc.2. May taxpayers request that the closing agreement include language pertaining to “innocent spouse” relief under section 6015?

A-Misc.2. Yes. Information relating to “innocent spouse” provisions can be included in the Form 906. This type of situation will be handled on a case-by-case basis and determined on the facts of the particular case. Appropriate closing agreement language can be inserted. The taxpayer should inform the Service of his or her desire to claim “innocent spouse” relief when submitting the additional information.

Q-Misc.3. How should the revenue agent handle a joint return where one spouse elects to participate but the other spouse does not and “innocent spouse” relief is not being claimed?

A-Misc.3. One spouse can elect to participate even if the other spouse does not. There are Non-Masterfile procedures for dealing with this situation. The revenue agent should seek assistance for this situation.

Q-Misc.4. Should a copy of the announcement be sent to the taxpayer and their POA to advise them of its issuance?

A-Misc.4. Although not a requirement, as a courtesy, the revenue agent may send a taxpayer under examination the announcement and the Notice of Election form. The agent may consult the Technical Advisor’s website for the form letter to be issued for transmitting the announcement and election form. If a joint return, separate letters to each spouse are required. If a TEFRA entity, the letter will be sent to the tax matters partner. Copies will be sent to the POA as appropriate.

Q-Misc.5. A taxpayer with a Notice 2000-44 transaction also engaged in another listed transaction in the same or earlier year. The taxpayer did not disclose the Notice 2000-44 transaction under Announcement 2002-2. How should the revenue agent treat the Notice 2000-44 settlement since it will be impacted by any adjustment related to the other listed transaction?

A-Misc.5. The taxpayer may participate in the settlement of the Son of Boss issue. The closing agreement should cover only the Son of Boss issue and will be a partial agreement. The taxpayer will have the 20 percent penalty applied to the underpayment attributable to the Son of Boss adjustment. If the disallowance related to the other listed transaction results in a future refund to the taxpayer, the 20 percent penalty applied to the Son of Boss adjustment will not be offset by any future refunds due to disallowance.

Q-Misc.6. Is the Notice of Election filed by the taxpayer binding on the taxpayer?

A-Misc.6. No. The terms of the settlement are not binding until execution of the closing agreement. The filing of the Notice of Election does not obligate or bind the taxpayer to enter into the closing agreement.

Q-Misc.7. Will electing to participate in the settlement initiative or settling under the initiative deprive a taxpayer of the benefit of interest suspension under section 6404(g) on the tax liability attributable to the Son of Boss transaction for the period preceding the taxpayer’s participation?

A-Misc.7. No. Neither filing a Notice of Election, nor executing a closing agreement will undo the suspension of interest under section 6404(g).

Q-Misc.8. When will the interest suspension period under section 6404(g) end for taxpayers participate in the settlement initiative?

A-Misc.8. Section 6404(g)(3) provides that the suspension period ends 21 days after the Service provides notice to the taxpayer of the amount and the basis for the liability. Section 4(c) of Announcement 2004-46 provides that the Service will mail a draft closing agreement to the taxpayer reflecting the terms of the settlement. With the draft closing agreement, the Service will include a Revenue Agent's Report, which will provide notice to the taxpayer of the amount and the basis for the liability. The Service will treat the mailing of the Revenue Agent's Report as the notice required by section 6404(g)(1)(A). The suspension period will end 21 days after the date the Revenue Agent's Report is mailed to the taxpayer.

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