Use a closing agreement to resolve combat-zone interest in a Tax Court settlement

Plain-English summary

Chief Counsel advised Appeals to use a closing agreement to resolve an interest issue involving Section 7508 combat-zone relief. The Tax Court normally lacks jurisdiction over deficiency interest, even though standard stipulated decisions state that interest will be assessed as provided by law. A closing agreement made as part of settling the deficiencies would resolve the interest issue immediately. The advice also said a separate email process was unnecessary because the IRS already had open communication with the taxpayer's representative.

Ruling snapshot

• Question: How should Appeals resolve the interest component of a combat-zone deficiency settlement pending in Tax Court?
• Outcome: Advice given to enter a closing agreement with the taxpayer.
• Key authorities: IRC §§ 6213(a), 7508; CCDM Exhibit 35.11.1-125

Full text (IRS public release)

ID: CCA_2018052509275153
UILC: 7508.00-00

Number: 201826010
Release Date: 6/29/2018
From:
Sent: Friday, May 25, 2018 9:27:51 AM
To:
Cc:
Bcc:
Subject: RE: combat zone, § 7508 and interest

Hello ------------

We suggest that IRS Appeals to enter into a Closing Agreement with the taxpayer
regarding the interest issue.

In Tax Court cases settled by Appeals, there is normally no agreement entered into
regarding interest due on a deficiency, because the Tax Court does not have jurisdiction
over interest. However, the standard Decision document in CCDM Exhibit 35.11.1-125
contains “below the line” stipulations that suggest interest is due and that it may be
immediately assessed. Therefore, a Closing Agreement regarding interest as part of
the settlement of the deficiencies looks like a good way to resolve the issue now.

These are the relevant below the line stipulations in an ordinary Tax Court Decision
document:
It is stipulated that the Court may enter the foregoing decision.
It is further stipulated that interest will be assessed as provided by law on the
deficiencies and
additions to tax due from petitioner.
It is further stipulated that, effective upon the entry of the decision by the Court,
petitioner
waives the restriction contained in I.R.C. § 6213(a) prohibiting assessment and
collection of the
deficiencies and additions to tax (plus statutory interest) until the decision of the
Tax Court has
become final.

We don't see a need to use the email process. That's good for identifying affected
taxpayers, but seems to serve no purpose when we already have open communication
with the representative.

Hope that helps.