Rev. Proc. 64-40

Section 1. PURPOSE

The purpose of this Revenue Procedure is to restate and supersede Revenue Procedure 63-9, C.B. 1963-1, 488, 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 case is considered closed when the taxpayer has been notified in writing of an adjustment to his tax liability or the acceptance of the return as filed.

.02 This procedure 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. 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 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 All recommendations to reopen cases as a result of post review action must be approved by the Assistant Regional Commissioner (Audit). All other reopenings must be approved by the District Director. If a re-examination of the taxpayer's books and records is necessary, a notification of re-examination under section 7605(b) of the Internal Revenue Code of 1954 will be issued by the Regional Commissioner.

.03 However, no approval by the Assistant Regional Commissioner (Audit) or the District Director is required to reopen a case if:

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

SEC. 4. EFFECT ON OTHER DOCUMENTS

This Revenue Procedure supersedes Revenue Procedure 63-9, C.B. 1963-1, 488.