This section provides general instructions for protecting tax returns, protecting the statute of limitations, scope of examinations, surveying returns and general examination guidelines.

Examiners should also refer to the following examination chapters for guidance: IRM 4.10, Examination of Returns; IRM 4.11.55, Examining Officers Guide (EOG), Power of Attorney Rights and Responsibilities; and IRM 25.27.1, Third-Party Contact Program.

Estate and gift tax examiners and managers assigned to examine and oversee the examination of estate and gift tax returns and issues are responsible for complying with servicewide policies and authorities set forth in IRM 1.2.1.5, Servicewide Policies and Authorities, Policy Statements for the Examining Process.

Examination of estate and gift tax returns should be conducted in a manner that will promote public confidence as stated in the Mission of the Service. See IRM 1.2.1.2.1, Policy Statement 1-1.

Policy Statement 4-52 established a general guideline that examination and processing of returns should be completed within 18 months of the filing date. See IRM 1.2.1.5.18, Policy Statement 4-52, Establishment of 18-month Examination Cycle.

Estate and gift examiners and managers assigned to examine and oversee the examination of international estate and gift tax returns and issues are responsible for complying with all applicable servicewide examination delegation orders and SB/SE delegation orders. A table summarizing estate and gift delegation orders is available at IRM 4.25.14.8, Estate and Gift Tax, Miscellaneous Procedures, Signature Authority.

Section 3504 of RRA 98, Public Law 105-206 requires the Service to include an explanation of the examination and collection process, as well as information about assistance from the Taxpayer Advocate with any first report/notice of proposed deficiency. Pub 3498, The Examination Process, must be used for this purpose.

Statement of Procedural Rules 601.506 requires that examiners must forward any correspondence (or copy), discussions, reports and/or other material to the taxpayer at the same time it is sent to the representative.

The Form 706 return instructions and CFR 20.6018-4, CFR 25.6019-3, and CFR 25.6019–4 list required filing documents.

The National Quality Review System (NQRS) is a web-based review system used by Estate and Gift Tax Policy, Estate and Gift Tax Examination Management and Field and Specialty Examination Quality to generate and review reports analyzing national quality performance based upon standardized quality attributes set forth in Document 12499, Estate and Gift Tax Examination Embedded Quality Job Aid. NQRS report data is compiled by Field and Specialty Examination Quality on a quarterly basis, but ad hoc reports may be obtained monthly. The use of NQRS is explained in additional detail in IRM 4.25.1.11, Manager Embedded Quality Review and Specialty Exam National Embedded Quality Review Programs.

Operational reviews and related NQRS reports are conducted by territory managers and the Chief of Estate and Gift to measure national adherence to quality standards and managerial performance and/or oversight.

Customer (i.e., taxpayer) satisfaction reports are generated by SB/SE Operation Support Research on a quarterly basis. These reports provide masked taxpayer narratives that are responsive to a pre-defined set of survey questions. The quarterly survey reports are to be used to identify areas for examination quality improvement.

Frequent front-line manager reviews are conducted under the Examination Quality Review System (EQRS), with the frequency based on annual personnel requirements.

The following table sets forth the Estate and Gift Tax program specific terms and definitions:

The following table sets forth common Estate and Gift Tax program acronyms:

The Estate and Gift Tax program is required to follow all servicewide examination procedures and those set forth in the SB/SE examining process IRM. The following IRM subsections provide additional information relating to the processing, classification and examination of Estate and Gift Tax program returns and claims:

Document 12499, Estate and Gift Tax Examination Embedded Quality Job Aid, is issued by Estate and Gift Tax Policy, and is relied upon for the application and interpretation of the quality attributes. The job aid includes complete instructions, definitions, and examples of how cases are evaluated.

The group manager and examiner are responsible for verifying and protecting the statute of limitations on all assigned cases. As tax returns are received in the group, the manager is required to ensure controls verifying the accuracy of the assessment statute expiration date (ASED) are in place. See IRM 25.6.23.5.1.2, Screening for Statute Accuracy. Controls are for filed returns and non-filer examinations. At the time a case is assigned, an examiner is required to verify the statute of limitations by comparing the original tax return received date and postmark date with the statute date reflected on Master File.

The statute of limitations is to be calculated pursuant to IRC 6501.

The Statute Verification Lead Sheet is a mandatory workpaper that must be completed and uploaded to the Issue Management System (IMS) case administrative issue within 45 days of the examiner’s case receipt.

When a signed return is filed by a taxpayer, the statute of limitations begins to run. If there is uncertainty after review of the guidance on statute date determination, use of the earliest potential statute date is encouraged. The examiner should document any uncertainty pertaining to the statute of limitations in the Statute Verification Lead Sheet.

Two digit alpha codes located in the "day" portion of the Statute of Limitations on Master File indicates there are special circumstances surrounding the statute. See IRM 25.6.23-3, Instructions for Updating the Statute on AIMS, paragraph (4) for a description of the available alpha codes.

The use of BMFOLT and/or AMDISA transcript will be necessary to verify the statute date.

If it is determined that the ASED is incorrect, update the ASED date as instructed in IRM Exhibit 25.6.23-3, Instructions for Updating Statute on AIMS.

Once the correct ASED is determined and updated, if necessary, the statute date must be closely monitored to ensure the Government and Taxpayer's interests are protected. The statute date will not change unless it is updated to reflect the execution of a Form 872, Consent to Extend the Time to Assess Tax, or when input of an alpha statute code is appropriate. The manager and examiner must continue to monitor the statute using the monthly Inventory Validation List (IVL), ERCS Statute Reports and Table 4.1, Returns with Statute Date Pending (Status Codes 10, 12, 13, 14, 15, 17, and 18), to ensure statute control procedures are started within 180 days of the expiration of the ASED.

Additional statute of limitations resources can be found in:

At the time a case is assigned, an examiner is required to verify any assessments and payments made to the account by comparing the original tax return with a transcript of the tax account.

The verification of the assessments and payments should include the amounts indicating whether any tax, interest, or penalties are owed at the time the examination begins.

Command code BMFOLT will provide current data on the account activity.

See the CFOL Express guide available on the Estate and Gift SharePoint.

The Audit Information Management System (AIMS) is a computer system used by Appeals, Examination, and TE/GE to control returns, input assessment/adjustments to Master File, and provide management reports. While the return is charged to Estate and Gift, the AIMS database tracks its location, age, and status.

Every Estate and Gift employee is responsible for ensuring the accuracy of the AIMS database.

This section will identify codes common to Estate and Gift Tax examinations, along with the IDRS command codes used to secure the current information reflected on Master File.

The following IDRS transcripts will be helpful in verifying account information. An examiner may request transcript PDF prints for one or all of the command codes listed below if they are not already in the file or if they are more than 60 days old:

The following codes should be verified by the examiner at the start of an examination:

See Document 6209, IRS Processing Codes and Information, for a complete listing and explanation of the codes used in Estate and Gift Tax examinations.

Required filing checks are necessary to ensure voluntary compliance. Examiners should determine that taxpayers are in compliance with all federal tax return filing requirements and that all returns reflect the substantially correct tax. Required filing checks are documented on the return specific mandatory case examination lead sheet and administrative case file workpapers. Required filing checks and related return research will vary based on the facts of each case.

IRM 4.10.5.2, Examination of Returns, Required Filing Checks, General Guidelines provides definitions and background information. Additional information on required filing checks can also be found at:

In addition to the filing check requirements discussed in paragraph (2), examiners are required to complete a filing check to ensure timely filing of Form 8971, Information Regarding Beneficiaries Acquiring Property from a Decedent.

Historical gift tax returns are stored at a consolidated site in Independence, MO referred to as the C-Site.

A document locator number (DLN) is assigned to a Form 709 at the time of processing. While gift tax returns are stored in Alpha order at the C-Site, they are stored in DLN order in Files, where current year returns are housed.

Gift Tax returns are temporarily stored until the donor is deceased at which time they are either associated with the estate tax return or scheduled for destruction if no estate tax return is required.

IDRS research must be conducted prior to submitting a request for a historical gift tax return. Using Command Code MFTRA Type C, verify the record for the gift tax return shows a transaction code (TC) 150 posting indicating a tax return has been filed. If a TC 421 is present on the account, the controlling DLN will appear next to it on the transcript.

For older returns, the MFTRA transcript may indicate that the MFT 51 has been removed to retention. An offline Retention Register is an account module that has been removed from Master File and stored on microfilm. If a Retention Register is needed, complete Sections 1-5 of Form 3774 and process as follows:

Complete Form 2275 using the data from the MFTRA transcript or Retention Register. For returns filed within the last two years, use a separate Form 2275 for each tax year. For returns filed more than two years ago, a request may be made on a single Form 2275 for the entire Alpha file. Provide all names and nicknames used by the taxpayer. See IRM 3.5.61.6 paragraph 2. Only complete the following information:

Route Form 2275 to Files for servicing. Fax requests per IRM 3.5.61.26. Wait 21 days for a response. Follow up with Files if no response.

When Form 2275 is stamped “DNIF” (Document Not In File) indicating the return was not located, it may indicate the document is waiting to be shelved. Wait 30 days for enough time to pass for the document to be refiled and submit the request again. Complete the Form 2275 as described in IRM 4.25.1.3.1 paragraph (6) except in Box 15, check B, Second.

When original Forms 709 need to be returned to the C-Site, use UPS. See the UPS address in IRM 3.5.61.3.3 paragraph (4).

Related estate tax returns, including a predeceased spouse’s return, may provide valuable information on a current examination.

Closed estate tax returns are stored in DLN order in Federal Records Centers (FRC). Estate tax returns are retained for 40 years.

IDRS research must be conducted prior to submitting a request for an estate tax return. Using Command Code MFTRA Type C, verify the record for the estate tax return shows a TC 150 posting indicating a tax return has been filed. If a TC 150 is present on the account, research the controlling DLN, which appears next to TC 421 on the transcript.

For older returns, the MFTRA transcript may indicate that the MFT 52 has been removed to retention. An offline Retention Register is an account module that has been removed from Master File and stored on microfilm. If a Retention Register is needed, complete Sections 1-5 of Form 3774 and process as follows:

The location for fulfilling the request depends on the status code and EGC:

Complete Form 2275 using the data from MFTRA or Retention Register. See IRM 3.5.61.6 paragraph 2. Only complete the following information:

During classification, returns may be identified as limited scope examinations.

Estate and Gift Workload Selection and Delivery (WSD) applies a project code 0902 on AIMS/ERCS before shipping the return to field offices.

The field offices may conduct limited scope examinations of items conducive to correspondence examinations and that do not require significant substantiation by the taxpayer.

Limited scope examinations do not require a probe for omitted assets and undisclosed transfers. The only lead sheets that are required for a limited scope examination are the Limited Scope Examination Mandatory Lead Sheet, the Statute Verification Lead Sheet and the Form 9984, Activity Record. See IRM 4.25.1.9, Estate and Gift Tax Exam Process and Documentation (EPD).

To make adjustments, complete reports in accordance with IRM 4.25.10, Case Closing Procedures.

Occasionally, special issues or circumstances related to estate and gift are identified and Estate and Gift Workload Selection and Delivery (WSD) initiates project cases. Project cases may have a defined cycle time. See IRM 4.25.4.8, Classification of Non-Filer and Under-Reporter Project Cases.

Typically, specific directions and procedures are provided upon the assignment of the project case. Project Case Lead Sheets are available in Notebook.

Refer to IRM 4.25.8, Delinquent Returns and SFR Procedures, for detailed information regarding project codes, tracking codes and case procedures.

In pre-planning an examination, the examiner should use sound judgment to determine the significant issues to be examined. This may necessitate declassifying issues and or adding issues in lieu of those classified. The scope of the examination should be documented in the workpapers.

When a Risk Summary (e.g., gift tax return picked up during the course of an estate tax return examination) is not included with the return, the scope of the examination should be documented in the workpapers.

Depth is the extent to which an issue is developed. It demonstrates the degree of intensity and thoroughness applied in order to make a determination as to the correctness of an item.

Examiners must exercise judgment in determining the depth required for the examination. Determining the depth for different issues will help to estimate the time needed to complete the examination. The following factors should be considered:

Time spent reviewing a return and its attachments and/or perfecting the file may be shown as below-the-line time on ERCS/IMS, by using Code 615, Survey. The number of hours spent reviewing the return and perfecting the file is not a consideration in determining whether the return was examined.

If an examiner decides that a case is likely to result in a change in tax and there is a plan to examine the return, the case should be opened (AIMS status code 12) and time charged to the case. This time may include time for further review and/or file perfection. If it is later determined that contact with the taxpayer or the taxpayer's representative will not be made, the examiner may survey the return, even with time charged to the case on ERCS, provided there has been no activity beyond that of a survey.

See IRM 4.25.10.3, Survey, for instructions on closing a surveyed case.

If the estate has elected and qualifies for the election under IRC 6166 and there appear to be no substantive audit issues on the return, the return may be surveyed.

Policy Statement 4-52 established a general guideline that examination and processing of returns should be completed within 18 months of the filing date. See IRM 1.2.1.5.18, Policy Statement 4-52.

The term significant activity is defined as any activity where the examiner performed substantial work that moved the case toward a conclusion. This does not include phone calls to or from the taxpayer to cancel or change appointments. It would include phone calls that discussed items which helped move the case toward a conclusion, appointments, requests for information, research, etc. Significant activity would also include follow-up contacts either to or from Engineers or other specialists. Examples of significant activity include but are not limited to:

The group manager may assign returns for examination and direct the scope of items to be investigated, the depth of the examination, the records for examination and examination techniques employed consistent with IRS Policy Statements. The case file should be clearly documented to reflect such directions.

While complexity of workload and conflicting demands are considered, the examiner should prioritize, plan, and schedule work accordingly. Generally, estate tax returns are examined in the order in which they are filed.

Certain matters are considered priority work requiring immediate, prompt or preferred attention. The following list contains examples of matters that are considered priority work.

Instances also occur where it is more practical to advance a recently filed case. Factors to consider:

Examiners may be required to examine cases in states other than their own. Online resources are available to assist in understanding distinctions among state laws. The online resources below are meant to be a starting point for the research and not a comprehensive listing.

Case actions should be completed in an efficient manner that does not unnecessarily delay resolution of the examination.

The national standard timeframes (unless noted, measured in calendar days) by which action should be taken are as follows:

All delays should be documented on the Form 9984, Activity Record.

Examination activity should be commensurate with the time charged to the case. Factors to be considered in determining appropriate use of time are issue complexity and potential, condition of the books and records, depth of legal research required, taxpayer/representative cooperation, and other problems that affect use of time.

Communications with taxpayers, authorized representatives, and third parties must be made in a timely fashion and in a firm, businesslike, and professional manner.

RRA ‘98 section 3705(a) requires that all oral and written communication with a taxpayer or authorized representative of a taxpayer shall include the name, telephone number and the unique identifying number (e.g., Smart-ID badge number) of the IRS employee the taxpayer may contact. The examiner will document the case Form 9984, Activity Record, to show that the taxpayer and/or representative was provided with the required identifying information during oral communications.

The examiner should advise the taxpayer of all rights and provide the taxpayer appropriate publications. The examiner should also keep the taxpayer or authorized representative informed throughout the examination process. Proper documentation regarding taxpayer rights and notification should be included in the case file.

A new case can be created in IMS through the ERCS Case Inventory or through a manual case entry.

IMS will generate a Case Tree when the case is created. The Case Tree contains auto-populated Case Attributes. The Case Attributes menu option in each Case Tree contains options for the management of Entities, Team Members, and Issues. The Case Attributes apply to all returns included in the case folder.

IMS has features that allow the user to customize the grids displayed on several of the screens. Once the grid is customized, IMS will show the information for all cases in that format.

The Entities section of the case tree is used to show the returns in the case.

The Return section of the case tree is used to view all returns in a case.

The Returns screen is also used to merge manually added returns with an ERCS record in IMS and to add a Form 5344, Examination Closing Record, Form 5351, Examination Non-Examined Closings, and Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties, when required, prior to closing a return off IMS.

The Team Members (IRS) screen is used to add, edit, and remove contacts from returns on the case.

IRS Team Members can be added and assigned case issues.

Taxpayer contacts

Time spent examining claims is tracked using three different tracking codes. These codes are referred to as "Protection of Revenue Base" (P of RB). Time spent examining the P of RB issues is separate from regular examination time. The P of RB indication in ERCS allows tracking of claim examinations. On IMS, these indicators are Revenue Protection Codes (RPCs). The three codes are:

The issue must be checked out to edit the Revenue Protection Code (RPC) in IMS.

Charging time to "P" and "R" does not change the process for requesting an update to the return for claim purposes. Although IMS will allow the correct P of RB codes to be input, the items ERCS needs to update the return are not included. See IRM 4.25.9, Requests for Abatement, Claims for Refund, and Doubt as to Liability in Estate and Gift Tax Cases.

Time is charged to the issues identified in the case. Issues are categorized in two ways: by selecting a Standard Audit Index Number (SAIN) and a number from the Uniform Issue List (UIL). Generally, the SAIN code relates to how an issue is reported on a return. Tracking issues using both the SAIN code and the UIL number will allow the IRS to plan and allocate resources more efficiently. Consequently, at least one SAIN code and one UIL number must be selected for each return within a case. Employees will use their professional judgment to determine the appropriate SAIN codes to apply to the case issues. SAIN codes will be entered for case issues, however, workpapers will be associated with the Administrative SAIN code. Employees may charge time to the Administrative issue. However, where an examining employee spends a significant amount of time on a particular issue the time charge should be associated with the SAIN code for that issue. In situations where a case is not started on IMS and therefore time needs to be entered retroactively, these time charges may be input in IMS in blocks of up to 99 hours, and a specific SAIN code need not be identified.

All returns must have the following SAIN Code issues added on IMS. An Administrative Issue (EG080) and Case Issues (Classified Issues for Issue Tracking and Feedback Form purposes) are required on all cases. An Administrative Issue (EG080) is created automatically. All case issues (classified issues) for the return and major issues that were not classified in the case file (i.e., any issues in the case that resulted in significant time expenditures regardless of change that was not identified during classification) must be added. Reference documents identifying applicable SAIN and UIL codes used by the Estate and Gift Program are located in the "CBF Support Materials" folder on the Estate and Gift SharePoint.

Administrative Issues and Case Issues may be established for the Team Coordinator or assigned to other team members. From the Add Issue screen, select the team member to be assigned to the issue from the drop-down list. IMS defaults to the user adding the issue and can be changed by clicking the drop-down list and selecting a different Assigned Team Member.

Once an examiner’s referral request to engineering is accepted and assigned, the examiner should add the assigned Engineer as a team member within IMS using the following steps:

In the Add Issue Screen, enter the date the examination began in both the Start Date and End Date fields. Both dates should be the same. Having the dates consistently entered will keep the detailed case issue(s) from being displayed when time is entered into the time sheet screen.

The UIL number relates the issue or SAIN to the applicable primary section. If not already populated in the Add Issue screen, add a UIL code that corresponds to the Issue. A UIL Code is required to close all cases off IMS.

A case may have multiple entities and each entity or return can close at a different time. There are two types of "Actual Closed Dates" - one date for the case and another date for each entity on the case. For the return that has been closed, close the case on the "Edit Entity" screen.

A Form 5344, Examination Closing Record, must be generated for each entity within IMS, before an actual closed date will be accepted for the case.

The Time Sheet window allows the IMS user to enter the various categories of time applied. Time may be entered as direct examination time or below the line time.

The Time Sheet window includes fields to explain the examination activity completed during the recorded time. This information is transferred to the Form 9984, Examining Officers Activity Record. The Form 9984 is used to document each action taken on the case. Documentation should include the date, location, time charged, and an explanation of each activity or contact. The activity record should provide a complete and concise case history. Recordation of events should be made by examiners or other employees responsible for activity on the case (e.g., group managers, engineers, clerical staff, team members, administrative staff, etc.)

Information recorded on the Form 9984 should include, but is not limited to:

The Primary Team Coordinator may obtain copies of other team members' (engineers, other examiners assigned to the case, etc.) Forms 9984 through the IMS team website.

The IMS case file includes tax returns, lead sheets, completed forms, workpapers and supporting documentation, including the pre-audit/pre-planning notes. The IMS case file documentation provides detail about the examination trail, indicates the status throughout the examination and supports the conclusions reached. See IRM 4.25.1-2.

Case building documents from the Case Built File must be imported to the workpapers IMS folder within 30 days of receipt of the CBF Notification Email.

The examiner must upload and synchronize all case documents to IMS per Exhibit 4.25.1-1, Required Uploads to IMS.

In IMS, workpapers are issue specific and uploaded from the Case Tree or in the Issue Tree. Workpapers, lead sheets, forms and letters can be created in IMS or they can be uploaded from previously created files. Workpapers, lead sheets, forms and letters can also be added to either an open or closed case file from the team website. For additional workpaper upload and sorting instructions see the Issue Management System (IMS) Estate and Gift User Guide.

The following documents should not be uploaded to IMS:

Synchronization is the process of transferring specific material to/from the examiner’s computer and the IMS Server. Once the synchronization is complete, any material synchronized on the examiner’s computer will be identical to the material on the IMS Server. There are five types of synchronizations performed in IMS: Summary, ERCS, Case, Reminder and Time.

Summary − A Summary Synchronization downloads the case information for any case for which the user is a team member or manager.

ERCS − An ERCS Synchronization will download return data assigned to the user in ERCS. IMS receives a download from ERCS nightly.

Case Synchronization allows the examiner to ensure that all uploaded work is saved to the IMS Server in the event of computer failure. Case specific information such as Issues, Information Document Requests (IDRs), and Workpapers upload and download using the Case Synchronization process. Examiners must run an IMS case synchronization at least once every week that they have taken action on a case. Examiners are not required to run a case synchronize for a case if no action was taken on that case since the last synchronization. The examiner will also check-in and synchronize all case documents at the time the examiner closes the case.

Reminder Synchronizations − The IMS Reminder menu is located on the IMS Toolbar. Users may view, edit, add, delete, activate, or deactivate reminders. Others cannot view an examiner's reminders. IMS also generates system reminders. The user should run a Reminder Synchronization to view the IMS generated reminders. These system reminders include:

Time Synchronizations − The IMS timekeeping system will track case time, miscellaneous direct examination time (MDET), and below-the-line (BTL) time. To input time on a return, the user must have created issues for the return. All direct examination time applied on IMS is by standard audit index number (SAIN) and uniform issue list (UIL) codes.

The Estate Tax Mandatory Lead Sheet replaced the essential elements of the Examination Planning and Work Paper Index, the Administrative Lead Sheet, the Other Tax Return Lead Sheet, and the Asset Probe Lead Sheet. The combined lead sheet serves as an index and summary of supporting workpapers and provides the following benefits:

The Estate Tax Mandatory Lead Sheet is required for estate tax case examinations not designated with a limited scope audit project code. However, all fields are not required in all examinations. The examiner will exercise judgment in determining which items are required based on the facts and circumstances of the specific case.

The following examination techniques should be addressed in all estate tax examinations:

The Limited Scope Audit Mandatory Lead Sheet replaced the essential elements of the LSA Examination Planning and Work Paper Index, the Administrative Lead Sheet, the Other Tax Return Lead, and the Asset Probe Lead Sheet. The new combined lead sheet serves as an index and summary of supporting workpapers and provides the following benefits:

In addition to the Limited Scope Audit Mandatory Lead Sheet, the examiner must complete a Form 9984, Activity Record and a Statute Verification Lead Sheet.

Limited Scope Audits will have specific examination issues designated in the Risk Summary or by the group manager. Unless permitted by the group manager, the examination issues will not be expanded beyond the selected/assigned issues.

The Gift Tax Mandatory Lead Sheet is required for gift tax case examinations not designated as limited scope audits. However, all fields are not required in all examinations. The examiner will exercise judgment in determining which items are required based on the facts and circumstances of the specific case.

The following examination techniques should be addressed in all gift tax examinations:

In examining a gift tax return, it is the responsibility of the examiner to determine if prior gift returns were filed, and to verify the amount of Deceased Spousal Unused Exclusion (DSUE) used, when appropriate. The examiner should review the complete procedures for securing historic estate and gift tax returns. See IRM 4.25.1.3.1, Retrieving Historical Gift Tax Returns, and IRM 4.25.1.3.2, Retrieving Estate Tax Returns for Reference.

The examiner must verify the statute of limitations for each gift tax return under examination and discuss the actions necessary to protect the statute of limitations with the group manager. The examiner should document the verification of the statute of limitations on the Form 9984, Activity Record, and on the Statute Verification Lead Sheet. See IRM 4.25.1.9.4, Statute Verification Lead Sheet, IRM 4.25.1.2.1, Verify and Protect the Statute of Limitations, and IRM 25.6.23-3, Instructions for Updating the Statute on AIMS.

Pub 1, Your Rights as a Taxpayer, and Notice 609, Privacy Act and Paperwork Reduction Act, must be provided to the taxpayer in all gift tax examination cases where the taxpayer is contacted.

The examiner should document the case Form 9984, Examining Officer’s Activity Record, with all actions relating to taxpayer rights. See IRM 4.25.1.8.8, IMS Time Sheet and Form 9984, Activity Record.

Except for a limited scope audit, the examiner should probe for undisclosed transfers.

The examiner must maintain significant examination activity every 45 days, and record their actions in the case Form 9984, Examining Officer’s Activity Record. See IRM 4.25.1.8.8, IMS Time Sheet and Form 9984 Activity Record.

Request support from internal specialists, outside fee appraisers, and paraprofessionals, when their participation enhances the quality, accuracy, and fairness of the examination. However, the examiner to whom the return was assigned, under the direction of the group manager, is responsible for making the recommendation of tax liability, ensuring conclusions are properly supported by the facts and law, and explaining adjustments to the taxpayer. See IRM 4.25.12, Valuation Assistance.

Obtain omitted copies of documents and information required to be filed with the return. Original documents should not be marked.

Information and copies of documents should not be obtained and made a part of the case file unless they are:

The purpose of the Statute Verification Lead Sheet is to verify the correct statute of limitations date. See IRM 4.25.1.2.1.

The examiner must verify the statute of limitations, complete the Statute Verification Lead Sheet and correct any statute inaccuracies on IDRS (e.g., ASED date) for all assigned cases within 45 calendar days from case receipt.

The examiner may need to update the Statute Verification Lead Sheet throughout the examination in order to document changes to the statute date as a result of consents or to confirm required statute control procedures.

The Form 9984, Examining Officer’s Activity Record, is used to document the hours charged to a case and to briefly record the examiner’s actions. The Examining Officer’s Activity Record is created in IMS from time sheet entries. See IRM 4.25.1.8.8, IMS Time Sheet and Form 9984, Activity Record.

The case file must contain a Form 9984 for all team members (e.g., engineers, paraprofessionals, etc.) who charged time to the case.

The Manager Plan to Close Lead Sheet should not be completed until the examination has been in process for 120 days. Even at that point in the audit cycle, a further exception exists for examinations that are substantially complete and do not require further managerial involvement. The plan to close meeting between the examiner and manager provides for an opportunity to discuss the status of the examination, problems or difficulties obtaining requested items, and follow up actions to be taken.

A Mutual Commitment Date should be discussed and documented during the Manager Plan to Close meeting. If a Mutual Commitment Date cannot be established, the examiner should provide an Estimated Closing Date.

The Manager Plan to Close meeting can be held independently or as part of a workload or Technical Time Report (4502) review.

The applicability of penalties should be considered during every audit and, if warranted, developed as the audit progresses. Only after all facts and circumstances surrounding an audit have been developed can a determination be made as to the application of appropriate penalties. See IRM 20.1.5, Return Related Penalties.

IRC 6751(a) requires that the Service provide the taxpayer with the name of the penalty, the Internal Revenue Code section under which the penalty is imposed, and a computation of the penalty on the notice (report) imposing the penalty.

The Penalty Approval Lead Sheet must be used by the examiner to determine whether an assessment of penalties is warranted in all cases with an increase in tax. The Penalty Approval Lead Sheet requires that the examiner seek their immediate supervisor’s approval. See IRM 20.1.1.2.3, Approval Prerequisite, and IRM 20.1.1.2.3.1, Timing of Supervisory Approval.

The assertion or non-assertion of penalties must be documented in the case file whenever an audit results in a deficiency. The extent of the documentation will depend on the nature of the adjustments and the amounts involved. Summary statements (e.g., negligence penalty applicable or negligence penalty deemed not applicable), are not sufficient. The examiner must cite the appropriate regulations, rulings or court decisions that are specific to the case’s facts and circumstances for assertion or non-assertion of penalties. Alternative penalty positions must be documented in the workpapers when applicable.

The examiner must use the Penalty Approval Lead Sheet to document the verification of previously assessed penalties.

See IRM 20.1, Penalty Handbook, for more information regarding the assessment or abatement of penalties. See also IRM 4.25.7, Estate and Gift Tax Penalty and Fraud Procedures.

IRC 6751(b) generally prohibits assessment of a penalty unless the initial determination of the penalty assessment was approved, in writing, by the immediate supervisor of the individual who made the determination or such higher level official as the Secretary may designate. The immediate supervisor must perform a meaningful review of the penalty determination. Proper written approval of the primary penalty and any alternative penalties included in the case file is mandatory. The examiner should document all formal and informal immediate supervisor involvement relating to any assessment or non-assessment of penalties in the Form 9984, Examining Officer’s Activity Record.

The examiner should also briefly address the assertion or non-assertion of penalties in the penalty portion of the case specific mandatory lead sheet (e.g., Estate Tax Mandatory Lead Sheet).

The examiner should review the accuracy of any previously assessed or abated penalties and document their findings in their workpapers.

The examiner should use the Reasonable Cause Lead Sheet to document a taxpayer or preparer’s reasonable cause defense to the assessment of penalties.

See IRM 20.1, Penalty Handbook and IRM 4.25.7, Estate and Gift Tax Penalty and Fraud Procedures, for reasonable cause analysis guidance.

During every audit, examiners must be alert to fraud indicators and assert the civil fraud penalty when there is clear and convincing evidence to prove that some part of the adjustment increasing the tax was due to civil fraud. See IRM 25.1.2.3, Indicators of Fraud. Such evidence must show the taxpayer's intent to evade tax, which the taxpayer believed to be due. For every case resulting in a deficiency, examiners must document their consideration of fraud, including applicable fraud indicators, even if the civil fraud penalty is not pursued or developed.

The Fraud Development Lead Sheet should be used to assist the examiner in determining whether the assessment of fraud penalties is warranted. For more information regarding fraud see IRM 25.1, Fraud Handbook, and IRM 4.25.7.7, Estate and Gift Tax Penalty and Fraud Procedures, Fraud.

Fraud considerations and factors should also be documented on the case specific mandatory lead sheet and conversations with the examiner’s group manager regarding fraud should be documented in the case Form 9984, Activity Record.

Risk analysis techniques are intended to assist the examiner in making decisions that may take additional time and involve some risk of failure or uncertainty of outcome. The examiner’s risk analysis should be documented on the relevant issue specific lead sheet. Risk analysis should be used to focus the examiner’s efforts on the issues that make a difference in the audit, instead of on the ones that have little or no adjustment potential. Risk analysis helps the examiner allocate time, resources, and efforts to gain efficiency, quality determinations, and taxpayer satisfaction. The examiner should apply risk analysis techniques to:

The examiner should consider the following concepts when applying risk analysis techniques:

The use of a lead sheet is required for all issues. However, the examiner may choose whether an issue-specific lead sheet, generic lead sheet or risk analysis technique best suits their needs. Regardless of which lead sheet is chosen, the examiner must use it to identify the issue and steps or actions taken to develop the facts, determine the applicable law, arguments made (including taxpayer arguments), and determine a conclusion for all classified or managerial selected issues. The examiner should document all managerial discussions to limit the examination issues in the relevant issue lead sheet and in the case Form 9984, Activity Record.

Issue lead sheets must reflect the issue name, adjustments (when applicable), conclusion, audit steps, facts, law, risk analysis, taxpayer's position, and conclusions reached. This information should be presented in a logical order so that the audit steps taken to support the conclusions can be easily determined. See IRM 4.10.9.6.2, Issue Lead Sheet, IRM 4.10.9.6.2.1, Issue Lead Sheet Format, and IRM 4.10.9.6.2.2, Issue Lead Sheet Content.

The "All-in-One" lead sheet combines all Estate and Gift EPD into one Microsoft Word document and uses the Navigation feature of Word to navigate through the lead sheet. The All-in-One lead sheet changes Notebook's current "Deploy the Lead Sheets You Need One at a Time" method to a "Delete the Lead Sheets that You Do Not Need" method. The purpose behind the All-in-One lead sheets is to provide an "audit map" to guide the examiner through examination issues and an "audit trail" for a team member or reviewer to follow when reviewing the actions taken and the examination conclusions reached by the examiner.

An attorney advisor on the Estate and Gift Policy Program Manager's staff shall be assigned responsibilities for the Estate and Gift Embedded Quality Program.

At the direction of the Estate and Gift Policy Program Manager, such attorney advisor's responsibilities include:

Territory Manager responsibilities include:

Field group manager responsibilities include:

Document 12499, Estate and Gift Tax Embedded Quality Job Aid, includes complete instructions, definitions, and examples of how cases should be evaluated by management and quality reviewers.