SECTION 3. SIGNIFICANT CHANGES

AND CLARIFICATIONS TO REV. PROC. 88–17

.02 Section 6212(c)(1) provides, in general, that if the Secretary has mailed to the taxpayer a notice of deficiency as provided in § 6212(a), and the taxpayer files a petition with the Tax Court within the time prescribed in § 6213(a), the Secretary has no right to determine any additional deficiency, except in the case of fraud, and except as provided in § 6214(a) (relating to assertion of greater deficiencies before the Tax Court), in § 6213(b)(1) (relating to mathematical or clerical errors), in § 6851 or 6852 (relating to termination assessments), or in § 6861(c) (relating to jeopardy assessments).

the notice has been mailed to the taxpayer, nor until the expiration of the 90day or 150-day restriction period, as the case may be, nor, if a petition has been filed with the Tax Court, until the decision of the Tax Court has become final. Under § 6213(d), a taxpayer may waive these restrictions at any time.

.04 Section 6501 provides generally that the amount of any tax imposed by title 26 must be assessed within 3 years after the return was filed. Section 6503(a) provides that the running of the period of limitations in § 6501 is suspended (after the mailing of a notice under § 6212(a)) for the period during which the Secretary is prohibited from making the assessment or from collecting by levy or a proceeding in court, and for 60 days thereafter.

.05(1) Section 6212(d) provides that the Secretary may, with the consent of the taxpayer, rescind any notice of deficiency mailed to the taxpayer. Any notice so rescinded is not treated as a notice of deficiency for purposes of § 6212(c)(1) (relating to further deficiency letters restricted), § 6213(a) (relating to restrictions applicable to deficiencies and petition to Tax Court), and § 6512(a) (relating to limitations in case of petition to Tax Court), and the taxpayer has no right to file a petition with the Tax Court based on the notice.

(2) The Technical and Miscellaneous Revenue Act of 1988 (Act), § 1015(m), 1988–3 C.B. 232, amended § 6212(d) by adding the following sentence: “Nothing in this subsection shall affect any suspension of the running of any period of limitations during any period during which the rescinded notice was outstanding.” This amendment is effective for notices of deficiency issued on or after January 1, 1986.

(3) The House Report accompanying the Act provides the following example to illustrate the operation of the final sentence of § 6212(d):

[A]ssume that six months remain to run on the statute of limitations with respect to a return when the IRS issues a statutory notice of deficiency. Issuance of this notice suspends the statute of limitations. If the IRS and the taxpayer agree to rescind the statutory notice, then as of the date

.03 Section 6213(a) states that within 90 days, or 150 days if the notice is addressed to a person outside the United States, after the notice of deficiency authorized in § 6212 is mailed, the taxpayer may file a petition with the Tax Court for a redetermination of the deficiency. Except as provided in § 6851, 6852, or 6861, no assessment of a deficiency and no levy or proceeding in court for its collection can be made, begun, or prosecuted until

1998–43 I.R.B. 7 October 26, 1998

.04 If the notice of deficiency was issued to a husband and wife jointly, Form 8626 and, if appropriate, Form 872 or Form 872-A, must be signed by both the husband and wife, or their authorized representative(s). If Form 8626 and/or Form 872 or Form 872–A is signed by a representative, and a power of attorney has not previously been filed, the power of attorney must be included with Form 8626.

.05 Form 8626 must cover the same tax period(s) as the notice of deficiency to which it relates and must reflect the same tax deficiency and penalties as the notice of deficiency.

of Final S Corporation Administrative Adjustment (FSAA).

.02 Whether a notice of deficiency will be rescinded is discretionary on the part of the Secretary. A notice of deficiency may only be rescinded with the consent of the taxpayer.

.03 If a notice of deficiency is rescinded, it is generally treated as if it never existed. Limitations regarding credits, refunds, and assessments relating to the rescinded notice are void and the rights and obligations of the parties that existed prior to the issuance of the notice of deficiency are reinstated. The rescinded notice does, however, suspend the running of the period of limitations under § 6503 for the period during which the notice is outstanding. The Commissioner or the Commissioner’s delegate may issue a later notice of deficiency in an amount that exceeds, is the same as, or is less than the amount in the rescinded notice of deficiency. The taxpayer may exercise all administrative and statutory appeal rights from a reissued notice of deficiency, but cannot petition the Tax Court from a rescinded notice of deficiency.

.04 Except as provided in section 4.05 of this revenue procedure, a notice of deficiency may be rescinded for the following reasons:

(1) The notice was issued as a result of an administrative error: for example, the notice was issued (a) to the wrong taxpayer, (b) for the wrong tax period, or (c) without considering a properly executed Form 872, Consent to Extend the Time to Assess Tax, or Form 872–A;

(2) The taxpayer submits information establishing the actual tax due is less than the amount shown in the notice; or

(3) The taxpayer specifically requests a conference with the appropriate Appeals office for the purpose of entering into settlement negotiations. However, the notice may be rescinded only if the appropriate Appeals office first decides that the case is susceptible to agreement.

.05 The Service will not rescind a notice of deficiency under the following circumstances:

(1) On the date of the rescission, 90 days or less would remain before the expiration date of the period of limitations on assessment. However, a notice of deficiency may be rescinded in these circumstances if, before the rescission, the tax

payer and the Service execute a consent to extend the period of limitations on Form 872 or Form 872–A; (2) The 90-day or 150-day restriction period under § 6213(a) has expired without the taxpayer filing a petition with the Tax Court;

(3) The taxpayer has filed a petition with the Tax Court; or

(4) The taxpayer and the Service, prior to the issuance of the notice of deficiency, have executed a Form 872–A covering any of the tax years in the notice of deficiency. A notice of deficiency may be rescinded in this situation, however, if prior to rescinding the notice of deficiency the taxpayer and the Service execute a new Form 872–A covering the same tax years as the earlier Form 872–A.