Rev. Proc. 63-9

SECTION 1. PURPOSE.

The purpose of this Revenue Procedure is to restate and supersede Revenue Procedure 59-25, C.B. 1959-2, 938, which sets forth the conditions under which cases closed by examination in the office of the District Director of Internal Revenue may be reopened.

SEC. 2. SCOPE.

.01 For the purpose of this procedure, a closed case is any income, estate, gift, excise or employment tax return closed by examination in the office of the District Director, in which the taxpayer has been notified in writing by the District Director of the adjustment in tax liability or the acceptance of the return as filed.

.02 It also includes estate tax cases subject to post review even though the closing letter has not been issued. It does not include any action pertaining to the reopening of cases or issues under the jurisdiction of the offices of the Appellate Division or the Regional Counsel.

SEC. 3. BACKGROUND.

.01 Cases closed in the office of the District Director may be considered for reopening as a result of additional information received by the District Director's office. This information may come from within or outside the Internal Revenue Service.

.02 Cases closed in the office of the District Director may also be considered for reopening as a result of errors disclosed by the regional post review. Under the regional post review authority, delegated to the Assistant Regional Commissioner (Audit) at the time the National Office responsibility for that function was transferred to the regional offices, examined cases are reviewed to discover and identify the categories of most frequent procedural and technical errors in order to improve the quality, technical accuracy, and uniformity of the audit activity. The cases selected for post review from among those closed in the district are reviewed only after all administrative processing, including the assessment of additional taxes and the scheduling of overassessments, has been completed in the district office.

.03 Since the issuance of Revenue Procedure 59-25, certain situations have arisen which make it necessary to supplement the conditions for reopening as restated in section 4 below. The "substantial error" rule is being restated, one additional condition for reopening added, and the format changed.

SEC. 4. CONDITIONS FOR REOPENING.

.01 It is the administrative practice of the Internal Revenue Service not to reopen cases previously closed by the District Director, unless--

1. There is evidence of fraud, malfeasance, collusion, concealment or the misrepresentation of a material fact; or

2. The prior closing involved a substantial error; or

3. Other circumstances indicate that failure to reopen would be a serious administrative omission.

.02 Reopening as the result of additional information received by the District Director's office must have the approval of the District Director, and reopenings recommended as a result of post review action must have the approval of the Assistant Regional Commissioner (Audit).

.03 However, it will not be necessary to obtain the approval of the Assistant Regional Commissioner (Audit) or the District Director to reopen cases under the following circumstances:

1. The Service receives a claim for refund or request by the taxpayer for reopening after the original audit has been completed.

2. The case involves section 3801 of the Internal Revenue Code of 1939 or section 1311 of the Internal Revenue Code of 1954.

3. The case involves the year of deduction of a net operating loss carryback.

4. It is a case in which there have been involuntary conversions and the taxpayer has not recomputed his tax liability because of his failure to replace the property within the time provided by law (section 1033 of the Internal Revenue Code of 1954).

.04 If a re-examination of the taxpayer's books and records is necessary, a notification of such re-examination under section 7605(b) of the 1954 Code will be issued by the Regional Commissioner.

SEC. 5. EFFECT ON OTHER DOCUMENTS.

This Revenue Procedure supersedes Revenue Procedure 59-25, C.B. 1959-2, 938.