8.19.13. Docketed and Department of Justice Cases

(1) Appeals employees must follow the work request procedures to request ATT assistance. Use of the ATT is mandatory for agreement package, closing package, and FPAA preparation. Follow the work request procedures in IRM 8.19.1.1.1, Appeals TEFRA Team (ATT). Also see detailed procedures for using the ATT on their ATT SharePoint site. A link to the site is found on the Appeals TEFRA website.

(1) These procedures are written for partnership tax years ending after August 5, 1997. If you have a partnership whose tax year ends before August 6, 1997, please contact the TEFRA Technical Specialists or the TEFRA AO assigned to your case for guidance.

(1) Refer to IRM 8.19.10 and IRM 8.20 for procedures for the receipt of TEFRA partnership cases by APS and other Appeals employees responsible for processing duties.

(2) These procedures include instructions for ACDS processing of docketed cases and notifying the key case CTF.

(3) Procedures for mailing closing packages and closing docketed cases are contained later in IRM 8.19.13.

(1) The AO should request work from the TCS by preparing Form 3608 (Request for Tax Computation Specialist (TCS) Service). Counsel attorneys can also use a Form 3608, or they may use Form 1734, or a memorandum with an attachment detailing the settlement amounts, e.g. Counsel Settlement Memorandum or Decision Document.

(2) The request for audit work should specify whether Tax Court Rule 248(a) or 248(b) is being used. If Tax Court Rule 248(c) will apply, the AO will follow the guidelines in IRM 8.19.13.2.11.

(3) For cases settled using Tax Court Rule 248(a), the TMP signs a stipulated decision to bind all partners in the key case to a settlement. No agreement forms are prepared or mailed to any partners.

(4) For cases settled using Tax Court Rule 248(b):

1. All of the participating partners (including the TMP if he/she is a participating partner) have entered into a settlement by signing a Form 870-PT(AD) or Form 870-LT(AD) part 1, or a closing agreement, and those agreements have been co-executed by a Service representative, or

2. All of the participating partners do not object to the granting of the Commissioner’s motion for entry of decision.

Note: As agreement forms are only needed from the participating partners, because the case is docketed, and because there are time frames that must be followed under the Tax Court Rules, it is recommended that Appeals mail the agreement forms to the participating partners.

Note: Refer to the "Definitions" section below for more information on who is a participating partner.

(5) When Tax Court Rule 248(b) is being used, as Appeals will be mailing the agreement forms to the participating partners, the agreement forms and the transmittal letters will have to be prepared by Appeals. The request for audit work should specify whether the TCS should prepare them.

1. In this situation, dialogue will be required between the ATM of both the AO and the TCS as to specifically what the TCS will prepare.

2. The AO should identify any special circumstances on the Form 3608, including parent-subsidiary relationships. The AO is ultimately responsible for the accuracy and completeness of the agreement forms and the transmittal letters.

(6) The request for audit work should clearly identify if there are any penalties or affected items.

(1) The TCS will prepare the following documents whether Tax Court Rule 248(a) or 248(b) is being used:

1. Form 4605-A

2. Form 886-Z

(2) If Tax Court Rule 248(b) is being used, the TCS will prepare the Schedule of Adjustments page of Form 870-PT(AD) or Form 870-LT(AD).

(3) See IRM 8.19.11.6.1, IRM 8.19.11.6.2, and IRM 8.19.11.6.3, respectively, for guidance in preparing Form 4605–A, Form 886–Z, and the Schedule of Adjustments page (if applicable for Tax Court Rule 248(b) cases).

(4) The TCS will also begin preparing the closing package to the CTF (including the Form 3210) if other documents are also being prepared. See IRM 8.19.13.2.4. If no other documents are being prepared, the AO is responsible for preparing the closing package and the Form 3210.

(5) Depending upon local procedures, the TCS will compute the revised dollar value for the key case using Exhibit 8.19.10–1.

(6) If Tax Court Rule 248(b) is being used, Appeals should be mailing the agreement forms to the participating partners. The TCS may be asked to prepare the agreement forms and the transmittal letters to the participating partners. For more information, refer to the dialogue needed under "Request for Audit Work" in IRM 8.19.13.2.2.

(1) A TEFRA closing package is a group of documents that is prepared and assembled after a TEFRA partnership case is resolved. The closing package is mailed to the key case CTF to associate with the tax returns of the partners in the TEFRA partnership in order that the tax resulting from their share of the adjustments made to the TEFRA partnership return are computed and assessed in a timely manner. If the ATT is used, the package will be electronically transmitted using the secure server.

(2) The TCS will begin preparing the closing package to the CTF (including the Form 3210) if other documents are also being prepared. If no other documents are being prepared, the AO is responsible for preparing the closing package and the Form 3210.

(3) If at the time that the TCS begins preparing the closing package and the Form 3210, some of the documents have not as yet been prepared by the AO (for example, the ACM or Form 5402), the AO will complete the preparation of the closing package.

(4) The AO is responsible for reviewing the closing package and is ultimately responsible for the accuracy and completeness of the documents.

(5) Various types of closing packages for docketed cases are as follows:

1. For cases resolved using Tax Court Rule 248(a) (by either Appeals or Counsel), refer to Exhibit 8.19.13-1 for a sample Form 3210 that lists the documents needed for the closing package.

2. For cases resolved using Tax Court Rule 248(b) (by either Appeals or Counsel), when the AO has secured agreement forms from the participating partners, refer to Exhibit 8.19.11–11 for a sample Form 3210 that lists the documents needed for the closing package. The “Remarks” section should note that the case is docketed and include the docket number.

3. For cases resolved using Tax Court Rule 248(b) (by either Appeals or Counsel), to reflect the entered decision that binds the partners other than the participating partners, refer to Exhibit 8.19.13-1 for a sample Form 3210 that lists the documents needed for the closing package.

4. The ATT will use Form 14298 and electronically transmit the packages for cases that are tried in the Tax Court or are settled by Associate Area Counsel, for cases that are tried in the Tax Court and are then appealed, for cases that are tried in the Tax Court and there is a final decision by the Appellate Court or the Supreme Court, and for Department of Justice cases.

(6) An IRC 6404(g) key case comment should be included on the Form 3210 in the "Necessary Actions" section. See IRM 8.19.1.7 and IRM 8.17.6.9. For example, if the earliest notice that was issued was a 60-day letter that was dated March 15, 2006, enter "60-day letter" and "March 15, 2006." There may be more than one notice for the same return and more than one IRC 6404(g) notice date.

(7) The AO, secretary, clerk, or APS (as determined locally) will make photocopies of the documents to be included in the completed closing package.

(8) In all situations, the AO is responsible for:

1. The accuracy and completeness of the Form 3210 (including the one-year statute date)

2. Reviewing the completed closing package

3. Submitting it to APS to mail to the key case CTF

(9) APS is responsible for:

1. Ensuring all documents listed on the Form 3210 are attached.

2. Sending the completed package to the CTF by controlled mail.

3. Monitoring the return of the acknowledged Form 3210

(1) The Tax Court adopted special rules to conclude partnership proceedings when the parties to the action have entered into a settlement agreement or consistent agreement.

(2) The importance of the rules is underscored by the fact that the Tax Court considers it likely that a substantial majority of partnership actions will be settled by the parties prior to trial.

(3) The Tax Court Rules include comprehensive procedures for settlement agreements, service of papers, duties of the TMP, definitions, and other areas relating to partnership actions.

(4) The Tax Court’s Rules of Practice and Procedure are found on their website.

(1) The Tax Court defined certain terms related to the unified proceedings in the Tax Court Rules as follows:

1. Tax Matters Partner: Per Tax Court Rule 240(b)(4), the person who is the tax matters partner under IRC 6231(a)(7) and who under these rules is responsible for keeping each partner fully informed of the partnership action.

2. Party to the Action: Per Tax Court Rule 247, each person who was a partner at any time during the partnership taxable year provided that partner has an interest in the outcome of the action and whose partnership items haven’t been converted to nonpartnership items. The TMP is treated as a party to every partnership action whether or not the TMP has an interest in the proceeding. The TMP is still a party to the action even if the TMP executed a settlement agreement converting his partnership items to nonpartnership items.

3. Participating Partners: Under Tax Court Rule 247, the partner(s) who filed the petition and other partners who filed a notice of election to intervene or a notice of election to participate. The TMP, by filing a notice of election to intervene, becomes a participating partner.

4. Intervenor: Under Tax Court Rule 245(a), the TMP may file a notice of election to intervene within 90 days from the date that the petition filed by another partner was served on the Commissioner by the court’s clerk. This election establishes the TMP as a participating partner.

(1) Tax Court Rule 248 establishes comprehensive procedures for settlement agreements. Those procedures are affected by the mandatory service requirements of Tax Court Rule 246 and the TMP’s responsibility to keep each partner informed.

(2) The Tax Court rules are effective as of October 3, 2008. Amendments to the Tax Court rules state their effective date.

(3) Exhibit 8.19.13-2 shows documents and signatures required for the specific provisions of Tax Court Rule 248.

(1) The procedures outlined below apply to the AO, associate area counsel attorney, or to both jointly, depending upon the circumstances of the case.

(2) The specific responsibilities for preparing certain documents such as correspondence to partners and the TMP and decision documents may vary depending upon local office policy and whether or not the ATT is used. In addition, responsibilities may vary depending upon whether Appeals or Counsel has jurisdiction. However, follow the procedures established in this text carefully due to the strict time constraints placed on the Service and the TMP for the notification requirements.

(1) When the TMP signs a stipulated decision to bind all partners in the key case to a settlement, follow Rule 248(a). The TMP may or may not be a participating partner.

(2) The TMP will sign a stipulation which will certify that no party objects to entry of the decision. This stipulation effectively binds all parties to the settlement and closes the case fully agreed.

(1) Rule 248(b) applies when the TMP will not certify that all partners do not object to the settlement. It covers those cases where:

1. All of the participating partners (including the TMP if he/she is a participating partner) have entered into a settlement by signing a Form 870-PT(AD), Form 870-LT(AD) part 1, or a closing agreement, and those agreements have been co-executed by a Service representative, or

2. All of the participating partners do not object to the granting of the Commissioner’s motion for entry of decision.

(2) Rule 248(b) establishes a procedure either to bring the proceeding to a conclusion or to require nonparticipating partners to request the court’s consent to continue the key case proceeding. This rule will be applied when the AO or associate area counsel attorney has received either of the following:

1. Signed agreement forms from all participating partners, or

2. Notification that no participating partner objects to the settlement.

(3) When the AO obtains signed agreement forms from all participating partners, consult Associate Area Counsel. The rule states that Associate Area Counsel must serve certain documents on the TMP within 3 days of filing a motion for entry of the decision. Therefore, the AO and associate area counsel attorney must carefully coordinate the agreement forms received from participating partners.

(1) These Tax Court procedures are used when one or more participating partners settle but the docketed case has at least one unagreed participating partner.

(2) Rule 248(c)(1) requires the IRS to notify the court when a participating partner enters into a settlement agreement or consistent settlement before the court proceeding is completed.

(3) Rule 248(c) applies only when Rule 248(a) and Rule 248(b) are not applicable. If all participating partners have settled, Rule 248(c)(1) and Rule 248(c)(2) are not applicable. This procedure doesn’t end the partnership proceeding.

(4) Rule 248(c)(2) provides the mechanism (explained below) by which all parties to the action are informed of a settlement so that they can request consistent settlement. The request for consistent settlement must be made no later than the 60th day after the day on which the settlement was entered into. Rule 248(c)(2) does not apply when a consistent settlement is entered into.

(5) If any partner, including a participating partner, signs an agreement, and the agreement (other than a consistent settlement) is accepted, a statement notifying the TMP of the settlement must be served on the TMP within 7 days of acceptance.

(6) Within 7 days of receipt, the TMP must serve this statement on all parties to the action who have not settled.

(7) Rule 248(c)(2) is followed when one or more participating partners have not agreed to a settlement. However, at some point during the processing of a case, all participating partners may agree. If this occurs, follow Rule 248(b).

(1) The AO will prepare the administrative file for forwarding to Associate Area Counsel when a settlement cannot be reached.

(2) The AO will prepare and leave an undated copy of Letter 971 to notify the TMP that the case is being transferred for trial preparation. Local APS will date and mail the Letter 971 before sending the case to Associate Area Counsel.

(3) The AO will submit the administrative file to the ATM for forwarding to Counsel.

(4) The associate area counsel attorney may request that Appeals assist in securing and processing settlement agreements while the case is in docketed status. This may include preparation of the Form 4605-A and Form 886-Z from the TCS, update of the one-year statute date, and processing instructions to the CTFs. Since the delegation order does not give Associate Area Counsel the authority to accept settlement agreements, Appeals may be asked to execute them.

(1) For cases that are either tried or settled by Counsel, after the decision is entered Counsel will return the case to Appeals for closing along with a copy of the entered decision, the counsel settlement memorandum (if applicable) and any special instructions. The cases should be sent to Laguna Niguel APS. The Appeals TEFRA Team (ATT) will assist, if necessary, in preparing the cases for closing.

(2) When the decision becomes final (90 days after the Tax Court entered the decision unless an appeal is filed), Laguna Niguel APS will:

1. Update the statute on ACDS to reflect the one-year statute date. In computing the one-year statute date, one day should be subtracted from the date that is one year from when the decision became final.

   Example: If the decision was entered by the Tax Court on August 31, 2009, the one-year statute date should be computed as follows: August 31, 2009 + 90 days = November 29, 2009 + 1 year = November 29, 2010 - 1 day = November 28, 2010.

2. Return the case to the ATT to prepare and electronically transmit a closing package to the CTF using the secure server. Form 14298, Appeals TEFRA Electronic Notice Package Check Sheet, is the cover sheet the ATT uses to electronically transmit documents to the CTF.

(3) When the decision is final, the one-year assessment period begins.

(4) If other documents are needed (for example, Form 4605-A and Form 886-Z), the ATT AO will submit a Request for Audit Work as provided in IRM 8.19.13.2.2.

(5) The TCS will prepare the documents requested as provided in IRM 8.19.13.2.3 and begin preparing the closing package as provided in IRM 8.19.13.2.4. If no other documents are being prepared, the ATT AO is responsible for preparing the closing package and the Form 14298 .

(6) In addition to a copy of the dated decision or order and the signed stipulation (if applicable), the following documents should be marked "Information Only-Do Not Mail to Taxpayer" and included in the closing package:

• Appeals Case Memorandum/Counsel Settlement Memorandum, if applicable

• Form 5402

• Form 9724

• Form 4605-A

• Form 886-Z

(7) Tried docketed TEFRA key cases are resolved under the rules of practice of the United States Tax Court. Tax Court Rule 155 states that Rule 155 computations determine deficiency, liability or overpayment amounts. Since there is only a determination of partnership level items and no determination of deficiency, liability or overpayment in TEFRA cases, the TCS will prepare a Rule 155 type computation, which will include the Summary Page showing the adjustment to the TEFRA partnership. See Exhibit 8.19.13-4.

(8) The ATT AO will enter the one-year statute date on the Form 14298. In computing the one-year statute date, one day should be subtracted from the date that is one year from when the decision became final (see Example in (2)a) above).

(9) The ATT AO will ensure that all required documents are included in the closing package. The ATT is ultimately responsible for the accuracy and completeness of the Form 14298, including the one-year statute date. The ATT AO will electronically transmit the closing package to the CTF using the secure server. After the CTF acknowledges receipt of the package, the ATT AO will return the file to Laguna Niguel APS.

(10) See IRM 8.19.13.2.16 for instructions for closing docketed cases.

(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. Counsel will prepare Form 9724 (memorandum from Chief Counsel) with instructions for processing the case. The cases should be sent to Laguna Niguel APS. The ATT will assist, if necessary, in preparing the cases for closing.

(2) After notification of the appeal is received, Laguna Niguel APS will:

1. Update ACDS with ACTION: APPEALED and TODATE.

2. Update the remarks section of ACDS.

3. Return the case to the ATT to prepare and electronically transmit a closing package to the CTF using the secure server. Form 14298, Appeals TEFRA Electronic Notice Package Check Sheet, is the cover sheet the ATT uses to electronically transmit documents to the CTF.

(3) If other documents are needed (for example, revised Form 4605-A andForm 886-Z), the ATT AO will submit a Request for Audit Work as provided in IRM 8.19.13.2.2.

(4) The TCS will prepare the documents requested as provided in IRM 8.19.13.2.3 and begin preparing the closing package as provided in IRM 8.19.13.2.4. If no other documents are being prepared, the ATT AO is responsible for preparing the closing package and the Form 14298 .

(5) The Form 14298 will notify the CTF that the Tax Court decision is on appeal to the circuit court and not to close the PCS/AIMS linkages. In addition to a copy of the dated decision or order, the following documents should be marked "Information Only-Do Not Mail to Taxpayer" and included in the closing package:

• Form 5402

• Form 9724

• Form 4605-A

• Form 886-Z

(6) If the Tax Court decision sustains the petitioner’s position, no assessment should be made on an appeal of that decision. However, if the appellate court reverses the Tax Court decision, and the petitioner appeals the results of the appellate court, assessments should be made on the parties to the action in accordance with the decision of the appellate court. The assessment may have to await the entry of a revised decision by the Tax Court.

(7) If a bond is posted, the Tax Court will determine the amount based on its estimate of the aggregate liability of the parties to the action (IRC 7485). Counsel, Appeals and the CTF should cooperate in a timely manner to provide the information needed by the court to determine the bond.

(8) If a bond is not posted, the Form 14298 will request that the CTF assess the partnership items in accordance with the Tax Court decision. Since the Tax Court decision is not final, the one-year assessment period has not begun.

1. Although the one-year assessment period has not begun, the ATT AO will enter a one-year statute date on the Form 14298. In computing the one-year statute date, one year will be added to the date that the appeal was filed.

   Example: If the appeal was filed on August 31, 2009, the one-year statute date should be computed as follows: August 31, 2009 +1 year = August 31, 2010.

2. If there are affected items, the Form 14298 should provide that these should not be assessed at this time, except for penalties for partnership tax years ending after August 5, 1997.

(9) The ATT AO will ensure that all required documents are included in the closing package. The ATT AO is ultimately responsible for the accuracy and completeness of the Form 14298, including the one-year statute date. The ATT AO will electronically transmit the closing package to the CTF using the secure server. After the CTF acknowledges receipt of the package, the ATT AO will return the file to Laguna Niguel APS.

(10) Laguna Niguel APS will return the file to Associate Area Counsel unless the Form 9724 provides other instructions for where the file should be sent.

(1) When an appeal from a Tax Court decision is final, the Department of Justice will return the case to Appeals through Counsel to notify the CTF to complete processing of the partnership items of the partners and to process the penalties and affected items. The cases should be sent to Laguna Niguel APS. The Appeals TEFRA Team (ATT) will assist, if necessary, in preparing the cases for closing.

(2) When the decision becomes final (90 days after the Tax Court entered the decision), Laguna Niguel APS will:

1. Update the statute on ACDS to reflect the one-year statute date. In computing the one-year statute date, one day should be subtracted from the date that is one year from when the decision became final.

   Example: If the decision was entered by the Tax Court on August 31, 2009, the one-year statute date should be computed as follows: August 31, 2009 + 90 days = November 29, 2009 + 1 year = November 29, 2010 - 1 day = November 28, 2010.

2. Return the case to the ATT to prepare and electronically transmit a closing package to the CTF using the secure server. Form 14298, Appeals TEFRA Electronic Notice Package Check Sheet, is the cover sheet the ATT uses to electronically transmit documents to the CTF.

(3) When the decision is final, the one-year assessment period begins.

(4) If other documents are needed (for example, Form 4605-A andForm 886-Z), the ATT will submit a Request for Audit Work as provided in IRM 8.19.13.2.2.

(5) The TCS will prepare the documents requested as provided in IRM 8.19.13.2.3 and begin preparing the closing package as provided in IRM 8.19.13.2.4. If no other documents are being prepared, the ATT is responsible for preparing the closing package and the Form 14298 .

(6) The following documents are needed for the closing package:

• Copy of dated decision or order

• Copy of signed stipulation (if applicable)

• Copy of Circuit Court decision rendered

• Copy of Supreme Court decision

• Form 5402

• Form 9253, Appellate Court Closing Memorandum

• Form 4605-A

• Form 886-Z

(7) The ATT AO will enter the one-year statute date on the Form 14298. In computing the one-year statute date, one day should be subtracted from the date that is one year from when the decision became final (see Example above).

(8) The ATT AO will ensure that all required documents are included in the closing package. The ATT AO is ultimately responsible for the accuracy and completeness of the Form 14298, including the one-year statute date. The ATT AO will electronically transmit the closing package to the CTF using the secure server. After the CTF acknowledges receipt of the package, the ATT AO will return the file to Laguna Niguel APS.

(9) See IRM 8.19.13.2.16 for instructions for closing docketed cases.

(1) All TEFRA key cases must be closed through Laguna Niguel APS. The AO should follow these closing procedures only if the AO did not use the ATT and TEFRA AO team member in working the case. If the AO used the ATT and TEFRA AO team member, then follow the procedures posted to the ATT sharepoint site. A link to the sharepoint site is found on the Appeals TEFRA website.

(2) Local APS enters the following in the ACDS fields:

• ACTION: Area location – LGN (example: ship AUS-LGN)

• TODATE: Date local APS ships the administrative file to Laguna Niguel APS

• Local APS ships the administrative file to Laguna Niguel APS.

• ACDS database for AO and AIMS remain open (not closed or transferred).

(3) Laguna Niguel APS, upon receipt of the administrative file, enters the following in the ACDS fields:

• FROM DATE: Date received in Laguna Niguel APS

• LACTION: LGN-ATT

• LTODATE: Date given to ATT Secretary/Screener/ATM

• Forwards the administrative file to the Appeals TEFRA Team

(4) The ATT performs a procedural review and will forward the administrative file to Laguna Niguel APS.

(5) Laguna Niguel APS 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

(6) Laguna Niguel APS will also input the following on ACDS:

• ACTION ACKCLS & TODATE

• RevsdTax--Enter revised tax from Form 5402 (also enter PropdTax if not previously entered); if the Form 5402 does not contain the revised tax, have the ATT compute the amount using Exhibit 8.19.10–1.

  Caution: The revised tax is not actually assessed against the partnership and should not be entered on Form 5403.

(7) See IRM 8.20.7 for instructions in completing Form 5403; in addition, enter "TEFRA Key Case Closing" in the Special Handling section.

(8) After the key case CTF has input the one-year statute date on PCS for all direct partners and has released the AIMS “H” freeze, APS may close the case from AIMS unless it has a PICF Code of 4 or 5. The case should not be sent to the key case CTF unless it has a PICF Code of 4 or 5.

(9) If the case has a PICF Code of 4 or 5, it is a partner in another TEFRA partnership and has to be sent to the key case CTF. Instructions for identifying the key case CTF may be found on the Appeals TEFRA website. Instructions for sending the case to the key case CTF are as follows:

1. Prepare Form 5403 following partial procedures. In item A, Special Handling Instructions, write "TEFRA Linkage – After Partial Closing, Forward to CTF."

2. Update the AIMS database to status 34. Update the PBC to 295 (for the Brookhaven CTF) or 398 (for the Ogden CTF).

3. Forward the administrative file via Form 3210, to the appropriate CTF. Ensure that 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.

(10) Laguna Niguel APS will ensure that copies of the following documents are in the administrative file before it is closed:

1. Appeals Form 4605-A

2. Appeals Form 886-Z

3. Appeals Case Memorandum

4. Affected item Appeals Case Memorandum (if applicable)

5. Form 5402

6. Form 5403 (original)

7. All agreement forms or closing agreements for partners who agreed (Tax Court Rules 248(b) or 248(c))

8. FPAA issued to the TMP

9. Certified mailing list

10. Tax Court petition

11. Dated/entered decision (or motion and decision) for each court

12. Counsel Settlement Memorandum (if applicable)

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

14. Form 9724 (Counsel Memorandum), if applicable

15. Acknowledged Forms 3210