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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