This IRM provides guidance and information to Appeals’ employees for working:

Appeals accomplishes our mission by considering protested and Tax Court-docketed cases, holding conferences, and negotiating settlements in a manner which ensures Appeals’ employees act in accord with the Taxpayer Bill of Rights (TBOR) in every interaction with taxpayers. See IRC 7803(a)(3). See also Publication 5170, Taxpayer Bill of Rights.

Estate taxes are generally provided for in IRC Subtitle B, Chapter 11.

Gift taxes are generally provided for in IRC Subtitle B, Chapter 12.

The Policy analyst shown on the Product Catalog page as the originator is the assigned author of this IRM.

Policy, Planning, Quality and Analysis (PPQA) provides trend and data analyses and detailed summary reports for Appeals.

See IRM Exhibit 8.1.1-1, Common Terms Used in Appeals, for common terms and definitions used in IRM Part 8. Terms listed in that exhibit are not included in this section.

The following table lists commonly used acronyms and their definitions for relevant terms used in this IRM:

This IRM is the primary source of guidance to Appeals on this program. The text of this IRM contains various references to assist employees who work estate and gift tax cases.

Use of the Issue Management System (IMS) is mandatory for working Field Small Business/Self-Employed (SB/SE) estate and gift tax cases. Cases carded into the Appeals Centralized Database System (ACDS) after February 6, 2012, must be worked in IMS in order to provide feedback to the originating function. However, ACDS remains the Appeals system of record for case management and recording time on cases.

An Online 5081 is required to gain access to IMS. Each user should request access to the "Issue Management System-Production-Appeals User Access (IMS)" application, or if that application is not available, the "IMS-PRODUCTION-LMSB USER ACCESS" application. In preparing their requests, users should add a statement indicating that an Examination Return Control System (ERCS) ID is not required. Additional information on IMS and related training modules can be found on the Appeals BSP web page at http://appeals.web.irs.gov/BusinessSystemPlanning/Applications/ims.htm.

The ATE must verify that each case assigned to him/her is on IMS. If the case is not on IMS, the ATE should ask the Appeals Team Manager (ATM) to find the missing case on the IMS Case Inventory and assign it to the ATE.

When closing estate or gift tax cases, the ATE must upload all pertinent closing documents on the IMS system. These documents may include, but may not be limited to:

Generally, information of a confidential nature is only disclosed when a taxpayer provides written authorization.

Estates and trusts act through their fiduciaries (i.e., executors, personal representatives, trustees, or administrators). A person acting in a fiduciary capacity is required to file Form 56, Notice Concerning Fiduciary Relationship, upon the creation and termination of the fiduciary relationship. See IRC 6903. These persons are generally not required to execute Form 2848, Power of Attorney and Declaration of Representative. See Treas. Reg. 601.504(b).

The declaration on Form 706, U.S. Estate Tax Return, when executed by an attorney, accountant or enrolled agent meets the "duly authorized in writing" requirement of IRC 6103(e)(6). Therefore, when an attorney, accountant or enrolled agent executes the declaration on Form 706, a separately executed Form 2848, Power of Attorney and Declaration of Representative, is not required. However, before the attorney, accountant or enrolled agent executes any other document on behalf of the taxpayer, there must be a properly executed Form 2848 on file evidencing the taxpayer’s prior delegation of such authority to the attorney, accountant or enrolled agent.

Cases arising under IRC 6166 involve an estate's election to pay the estate tax in installments over a period of two to fifteen years at a reduced rate of interest.

Estates must meet the following eligibility criteria in order to make a valid election under IRC 6166:

The maximum amount of estate tax that can be deferred under IRC 6166 is determined by the following formula:

The non-deferrable portion of the estate tax must be paid by the due date of the return, unless the estate has an extension of time to pay under IRC 6161.

Generally, most estates can defer payment of the first installment of tax for up to five years from the original due date for payment per IRC 6166(a)(3). In these cases, the estate will pay only interest on the deferred estate tax amount for the first five years of the deferral period. However, elections falling within the purview of IRC 6166(b)(8) and IRC 6166(b)(10) do not qualify for this interest-only deferral period, and must begin making installment payments of tax in the first year of the election.

An election under IRC 6166(a) must be made with a timely filed return, and the executor must attach a statement (a.k.a. Notice of Election) to the Form 706 with computations showing the deferred tax, non-deferred tax and closely held business amount. The statement should include the following information:

Pursuant to IRC 6166(b) an interest in a closely held business is defined as:

Indirect Ownership by a spouse or family member is generally taken into account for purposes of calculating the estate’s interest in a closely held business. See IRC 6166(b)(2)(B) (attribution rules for a spouse), IRC 6166(b)(2)(D) (attribution rules for family members). However, in certain cases there may be additional eligibility requirements. See IRC 6166(b)-(h).

If the estate owns two or more businesses that meet the requirements under IRC 6166(c), the interests may be treated as an interest in a single closely held business.

Special rules apply to stock in a holding company. IRC 6166(b)(8)(A). The portion of non-readily-tradeable stock of any holding company which represents direct ownership by such company in a business company shall be deemed stock in such business company. A business company means a corporation carrying on a trade or business. Generally, estates that make an election under IRC 6166(b)(8) cannot defer the first installment under IRC 6166(a)(3) and are subject to a higher interest rate on the deferred tax. IRC 6166(b)(8)(A).

Deferral is not available for passive assets. See IRC 6166(b)(9). The term "passive asset" is defined in IRC 6166(b)(9)(B)(i) as any asset other than an asset used in carrying on a trade or business. Management of investment assets would be considered passive assets.

IRC 6166(b)(10) provides that an estate may elect to treat all the assets used in a "qualifying lending and finance business" as assets used in carrying on a trade or business. Thus, none of the assets in a "qualifying lending and finance business" will be considered passive assets under IRC 6166(b)(9). Estates that make an election under IRC 6166(b)(10) are allowed a maximum of 5 installments of tax, rather than the usual 10, and cannot defer the first installment under IRC 6166(a)(3).

Certain events may cause the estate to lose the benefits of the election, thus accelerating the remaining installments.

Where a tax deficiency is assessed and the estate had not previously made an IRC 6166 election on the original return, IRC 6166(h) provides that the estate may elect to pay the deficiency in installments if it meets eligibility criteria under IRC 6166(a). However, the estate cannot defer more than the deficiency amount. See Rev. Rul. 81-294. The election must be made within 60 days of the issuance of the notice and demand for payment of the deficiency. IRC 6166(h)(2).

Where a tax deficiency is assessed and the estate had previously made an IRC 6166 election on the original return, IRC 6166(e) provides for the automatic proration of the deficiency attributable to the closely held business into installments. On or after the date for payment, the part of the deficiency prorated into installments must be paid upon notice and demand.

IRC 2032A cases require a Form 6111, Notice of Special Use Valuation Election, (IRC 2032A). The form is necessary to attach a lien under IRC 6324B.

The originating function prepares Form 6111 and includes a copy in the case file. However, if the information contained on Form 6111 needs to change as a result of the Appeals settlement, the ATE will prepare a new Form 6111, which supersedes the one prepared by the originating function.

When closing IRC 2032A cases, the ATE will prepare a customized Form 5402 that includes the following special instructions for APS:

A TCS will prepare the settlement computation for estate tax cases following the general procedures outlined in IRM 8.17.2, General Settlement and Rule 155 Computations.

The Appeals employee who prepares the settlement computation is also responsible for preparing the Form 5403 Worksheet at the time the computations are prepared. For more details on the Form 5403 Worksheet, see IRM 8.17.5.2, Form 5403 Instructions to APS Worksheet, and related subsections.

In most estate tax cases, Form 3614-A, Estate Tax, and/or Form 1273, Report of Estate Tax Examination Changes, are used for the computations. In addition, the TCS may also use Form 6180, Line Adjustments-Estate Tax.

For estates of decedents who died on or before December 31, 2004, IRC 2011 provides a credit against the federal estate tax for death taxes paid to any state or the District of Columbia. The taxpayer must provide evidence to substantiate entitlement to this credit.

All settlements involving a change in estate tax and/or related penalties require an agreement form.

For a list of differences between general and special agreement forms, see IRM 8.6.4.3.1, Distinction Between General and Special Agreement Forms.

In order to properly secure and execute agreements in estate tax cases, it is important to understand the difference between net deficiency and gross deficiency laid out in IRM 8.7.4.3.4, Settlement Computations in Estate Tax Cases.

When a settlement is reached on the basis of the gross deficiency, the ATE will secure Form 890 or Form 890-ADfor the gross deficiency. In these cases:

When a settlement is reached on the basis of the net deficiency, the ATE will secure Form 890 or Form 890-ADfor the net deficiency. In these cases the ATE will follow these procedures:

In all estate tax cases, the ATE will assemble the administrative file in chronological order and include all documents necessary for APS and the ATM to close the case.

When closing agreed non-docketed estate tax deficiency cases, the ATE will prepare a closing folder with the following documents:

When closing unagreed non-docketed estate tax deficiency cases, the ATE will prepare a closing folder with the following documents:

When closing agreed docketed estate tax deficiency cases, the ATE will prepare a closing folder with the following documents:

When closing unagreed docketed estate tax deficiency cases to Counsel to prepare for trial, the ATE will prepare a closing folder with the following documents:

For procedures on closing IRC 6161 cases, see IRM 8.7.4.5.10, Closing Non-Docketed IRC 6161 Cases, and IRM 8.7.4.5.11, Closing Docketed IRC 6161 Cases.

For procedures on closing IRC 6166 cases, see IRM 8.7.4.3.2.9, ATE's Case-Closing Procedures for IRC 6166 Cases.

For procedures on closing IRC 2032A cases, see IRM 8.7.4.3.3, Special Use Valuation Elections under IRC 2032A.

For procedures on closing claim cases, see IRM 8.7.7, Claim and Overassessment Cases.

Appeals will expedite the closing of certain "agreed and unpaid deficiency" or overpayment cases if the case meets the "large dollar" criteria described in IRM 4.4.18, AIMS Procedures and Processing Instructions, Large Dollar Cases. For additional procedures on closing "large dollar" cases, see IRM 8.2.1.10, Closing the Case to APS, and IRM 8.2.1.10.1, Expedite Processing for Certain Large Dollar Cases.

.

A TCS will prepare the settlement computation for gift tax cases following the general procedures outlined in IRM 8.17.2, General Settlement and Rule 155 Computations.

The Appeals employee who prepares the settlement computation is responsible for preparing the Form 5403 Worksheet at the time the computations are prepared. For more details on the Form 5403 Worksheet, see IRM 8.17.5.2, Form 5403 Instructions to APS Worksheet, and related subsections.

In most gift tax cases, Form 3615-A, Gift Tax, and Form 3233, Report of Gift Tax Examination, are used for the computations. The starting point is usually the original return as filed or the latest processed amended return.

A gift tax deficiency is computed by calculating the "gross gift tax" at current gift tax rates on the total amount of taxable gifts made during the current period and all prior periods. See IRC 2502(b). The "gross gift tax" is then reduced by the portion of the gift tax attributable to taxable gifts for all prior periods to arrive at the gift tax attributable to taxable gifts made in the current period.

All settlements involving a change in gift tax and/or related penalties require an agreement form.

For a list of differences between general and special agreement forms, see IRM 8.6.4.3.1, Distinction Between General and Special Agreement Forms.

In all gift tax cases, the ATE will assemble the administrative file in chronological order and include all documents necessary for APS and the ATM to close the case.

When closing agreed non-docketed gift tax deficiency cases, the ATE will prepare a closing folder with the following documents:

When closing unagreed non-docketed gift tax deficiency cases, the ATE will prepare a closing folder with the following documents:

When closing agreed docketed gift tax deficiency cases, the ATE will prepare a closing folder with the following documents:

When closing unagreed docketed gift tax deficiency cases to Counsel to prepare for trial, the ATE will prepare a closing folder with the following documents:

For procedures on closing claim cases, see IRM 8.7.7, Claim and Overassessment Cases.

For procedures on closing IRC 6161 cases, see IRM 8.7.4.5.10, Closing Non-Docketed IRC 6161 Cases, and IRM 8.7.4.5.11, Closing Docketed IRC 6161 Cases.

Appeals will expedite the closing of certain "agreed and unpaid deficiency" or overpayment cases if the case meets the "large dollar" criteria described in IRM 4.4.18, AIMS Procedures and Processing Instructions, Large Dollar Cases. For additional procedures on closing "large dollar" cases, see IRM 8.2.1.10, Closing the Case to APS, and IRM 8.2.1.10.1, Expedite Processing for Certain Large Dollar Cases.

.

If the President of the United States makes a disaster or emergency declaration, IRC 7508A confers upon the IRS expanded authority to provide relief in the form of extensions of time to file under IRC 6081 or pay under IRC 6161. See IRM 25.16.1,Disaster Assistance and Emergency Relief, Program Guidelines, for additional information.

To provide relief for a local disaster whose magnitude does not warrant a Presidential declaration, local IRS officials may provide extensions of time to file under IRC 6081 or pay under IRC 6161. See IRM 25.6.1.10.2.9.3, Disaster Area Recognized by Local Service Officials, for additional information.

Extensions of time to pay estate tax:

Extensions of time to pay gift tax:

The Service examines applications for an extension of time to pay within 30 days of receipt. The taxpayer is notified whether the application is denied, granted, or tentatively granted subject to certain conditions. See IRM 5.5.5.1, Section Overview Request for Extension of Time to Pay Estate Tax, for additional information.

All IRC 6161 requests for extension of time to pay estate tax (Form 4768) are adjudicated by Advisory.

All IRC 6161 requests for extension of time to pay gift tax (Form 1127) are adjudicated by the E&G Campus.

The Compliance employee assigned to adjudicate the request for an extension of time to pay makes an initial determination based on reasonable cause or undue hardship. See IRM 5.5.5.4, Evaluating Requests for Extensions of Time to Pay, for additional information.

The Compliance employee assigned to adjudicate the request for an extension of time to pay also reviews previous extension requests to ensure that the government’s interests are protected before an additional extension is granted.

Where the government's interests would be at risk by granting an additional extension of time to pay, the request may be granted on the condition the taxpayer posts a bond or other security. See IRC 6165 and IRM 5.6.1.3.3, Estate Tax Bonds and Other Collateral, for additional information.

In some cases, the IRS may also file a Notice of Federal Tax Lien as a condition precedent to approving an extension request.

IRC 6161 cases are not controlled on the Audit Information Management System (AIMS).

Generally, IRC 6161 requests can be denied for any of the following reasons:

When the extension is denied because it was not timely requested, Advisory assesses a failure-to-pay penalty from the due date of the return or the previous extended due date for payment. The Advisory employee will input a TC 270 entry for the penalty on IDRS.

When extension requests are denied, Advisory retains the closed case file and generally sends the second page of Form 4768 (or Form 1127) and Publication 1, Your Rights as a Taxpayer, to the taxpayer. In lieu of using the second page of Form 4768 (or Form 1127), Advisory may communicate the denial determination through a letter. In either case, taxpayers may appeal the determination. See IRM 1.2.47.9, Delegation Order 8-8 (Rev. 1) (formerly DO-66, Rev. 15), and Rev. Proc. 79-55. The denial instructions outline that a written appeal may be made by registered or certified mail within 10 days after notice of denial is mailed. See IRM 5.5.5.8, Denial of Requests for Extension of Time to Pay, and Treas. Reg. 20.6161-1(b) for additional information. The appeal is considered filed on the date it is postmarked. If the due date falls on a Saturday, Sunday or legal holiday, it will be considered timely if postmarked by the next business day.

When Advisory receives an appeal, the Advisory employee will date-stamp the protest letter and verify that it was filed timely. The Advisory employee will then forward all pertinent information on a Form 3210 to the Appeals Office for the state of the decedent’s last domicile.

Upon receipt of a protest letter, the Advisory employee will also notify the E&G Campus that the taxpayer has requested an appeal so that the account remains in status 14 and payment due notices are not sent during the Appeals process.

Upon receipt of an IRC 6161 case, the ATE will complete the ordinary intake procedures fully described in: (i) IRM 8.2.1.4, Receipt of New Assignment by an Appeals Technical Employee (ATE); and (ii) IRM 8.2.1.6, Preliminary Review of a Case – ATE.

In summary, IRM 8.2.1.4, Receipt of New Assignment by an Appeals Technical Employee (ATE), generally requires the ATE to perform the following intake actions within 45 days of receiving the case:

In validating the data entered in ACDS, the ATE will verify the case was established in ACDS following the same procedures used for income tax cases—except for the following:

Appeals employees should always be aware of the statute dates on cases in their physical possession. See IRM 8.21.3.2.3, Protecting the Statute.

The IRC 6501 ASED is not affected by requests for extensions of time to pay under IRC 6161, regardless of whether they are approved or denied.

The IRC 6502 CSED may be affected by requests for extensions of time to pay under IRC 6161, as follows:

Estate Tax:

Gift Tax:

The Treasury Regulations provide that an application for extension of time for payment will not be considered unless the extension is applied for on or before the date for payment of the tax or installment. Treas. Reg. 20.6161-1(b); Treas. Reg. 25.6161-1(c). The Service has taken the position that timely filing is an absolute requirement. See IRM 4.25.2.4.2.4, IRC 6161 Extension of Time to Pay, for additional information.

The final authority granted to Appeals does not include the authority to consider whether the taxpayer had reasonable cause for filing a late application. If it is determined the application was filed late, the ATE will sustain the denial of the extension request. In the closing letter to the taxpayer, the ATE should cite: Treas. Reg. 20.6161-1(b), in estate tax cases; or Treas. Reg. 25.6161-1(c), in gift tax cases.

However, if an ATE determines that the application was timely filed, the ATE should then return the case to the originating function for that office to consider the application on the merits based on reasonable cause or undue hardship and make an initial determination.

Estate tax cases: Requests for extensions of time to pay estate taxes may be subject to either a reasonable cause or an undue hardship standard, depending on the following distinguishing criteria:

Gift tax cases: Requests for extensions of time to pay gift taxes are always subject to an undue-hardship standard. Treas. Reg. 25.6161-1(b). The Regulations provide examples of cases in which granting an extension of time to pay a gift tax liability may be appropriate due to undue hardship. Treas. Reg. 25.6161-1(b).

In addition to establishing reasonable cause or undue hardship, IRC 6161 cases require an analysis of the progress and efforts being made to borrow or liquidate assets to otherwise pay the amount due. The ATE may wish to consider the following:

Although the time for payment of a balance due from the original return may have been extended under IRC 6161, a deficiency assessment is not automatically covered in the extension; it is instead subject to payment on notice and demand. Conversely, the assessment of a deficiency does not disturb the existing extension of time to pay the balance due from the original return. See IRM 4.25.2.4.2.4, IRC 6161 Extension of Time to Pay, for additional information.

Estate Tax deficiency:

Gift Tax deficiency:

Closing IRC 6161 cases requires special action by Advisory to unfreeze an account and manually bill it. For this reason, Advisory continuously monitors IRC 6161 cases in Appeals. Generally, the Advisory employee will contact the ATE assigned to the case every 90 days to inquire into the status of the case. If the ATE does not respond to the Advisory employee’s inquiries, Advisory will contact the Appeals Account Resolution Specialist (AARS) team to locate the case and obtain an update on its status. See IRM 5.5.5.8, Denial of Requests for Extension of Time to Pay, for additional information.

For the reasons stated above, Appeals must communicate its final determination on an IRC 6161 case to Advisory. Therefore, when closing an IRC 6161 case, it is important that the ATE, through APS, send the administrative case file, as well as the ACM, to the originating Advisory employee. The ATE should include an additional copy of the ACM in the closing folder to be retained by Advisory.

A docketed Estate or Gift Tax case with an IRC 6161 issue will always have at least another substantive issue, because the mere denial of an IRC 6161 request is not subject to review by the Tax Court.

For all unagreed docketed IRC 6161 cases (whether Estate Tax or Gift Tax), the ATE will follow established procedures for closing an unagreed docketed case in IRM 8.4.1.18, Docketed Case Not Settled by Appeals - Jurisdiction Released to Counsel.

The closing procedures for agreed docketed IRC 6161 cases are different for Estate Tax and Gift Tax cases. For procedures on closing agreed docketed estate tax cases, see IRM 8.7.4.5.11.1, Closing Agreed Docketed Estate Tax IRC 6161 Cases. For procedures on closing agreed docketed gift tax cases, see IRM 8.7.4.5.11.2, Closing Agreed Docketed Gift Tax IRC 6161 Cases.

Preconference communications between Compliance E&G and Appeals are an example of the type of communications that the ex parte rules were designed to prohibit. Rev. Proc. 2012-18. Therefore, the ATE must abide by the ex parte rules at all times.

Pursuant to the ex parte rules, the taxpayer/representative must be given an opportunity to participate in the preconference. Rev. Proc. 2012-18, § 2.03(5). In providing the taxpayer/representative an opportunity to participate in the preconference, the ATE should closely follow IRM 8.1.10.5, Opportunity to Participate.

The ATE must document the following events in the ACDS Case Activity Record:

Either Appeals or Compliance E&G can request a preconference, but participation is voluntary and requires the assent of both parties.

Regardless of which party initiates a request for a preconference, the request must be in writing and must identify the unusual or complex issues that warrant the preconference.

If a preconference is requested by Compliance E&G, such request will accompany the file when it is received by Appeals in the form of a separate memorandum signed by the Compliance E&G group manager. IRM 4.25.13.2.2(4), Appeals Preconference Procedures.

If Compliance E&G does not request a preconference but the ATE believes that a preconference would be helpful, the ATE may send a written request for a preconference to the Compliance E&G group manager with a courtesy copy to the ATM.

If the party receiving a request for a preconference chooses to grant the request, it may do so by submitting a written response to that effect to the other party, with courtesy copies to the respective managers.

Either party may decline a request for a preconference. This is done by submitting a written response to that effect to the other party, with courtesy copies to the respective managers.

The ATE will arrange the preconference and will determine the date, time, location, and means of communication.

The preconference must take place prior to the Appeals conference with the taxpayer/representative.

Pursuant to the ex parte rules, the taxpayer/representative must be given an opportunity to participate in the preconference. See IRM 8.7.4.6.1, Ex Parte Considerations.

Appeals and Compliance E&G will each identify a list of participants to the preconference. The participants will usually consist of the Compliance E&G group manager, the Estate Tax Attorney/Examiner, the ATE, and the taxpayer/representative (if they choose to attend). The ATM may also participate at his/her discretion. Occasionally, the list of participants may include other technical specialists.

When closing a case in which a preconference was requested, the ATE will prepare a customized Form 5402 and make the following selections under the “Special Features” section:

The Office of Art Appraisal Services (AAS) consists of appraisers who can provide appraisal services with respect to works of art such as paintings, drawings, prints, sculptures, ceramics, decorative arts, textiles, carpets, silver, rare manuscripts, antiquities, ethnographic art, collectibles, classic automobiles, and historical memorabilia. In addition, AAS can assist ATEs in locating experts in other fields.

The ATE must request valuation assistance by AAS for any single work of art with a claimed value per return of $50,000 or more with respect to which Exam has raised a valuation issue.

All requests for AAS assistance must be initiated through the Specialist Referral System (SRS). The SRS is an online system that automates the referral request process. When a request for assistance is submitted, SRS automatically routes the request to the appropriate specialist's manager.

Upon notification of assignment to an appraiser, the ATE will send a copy of the referral with the necessary supporting documents and Form 3210, Document Transmittal, via UPS Ground to:

See IRM 8.18.1, Valuation Assistance Procedures, for more detailed instructions and procedures on obtaining valuation assistance from AAS.

Engineering and economist teams are composed of specially educated and trained professionals who can assist with a wide array of valuation issues not stemming from works of art.

The ATE must request engineering or economist assistance in the following circumstances:

All requests for engineering or economist assistance must be initiated by submitting Form 13381, Appeals Technical Guidance Referral. Form 13381 must be submitted electronically through ACDS. Resources on how to electronically prepare and submit Form 13381 can be found on the Appeals Technical Guidance web page.

Upon notification of assignment to an engineer or economist, the ATE will work directly with the engineer or economist to transmit the necessary supporting documents.

Letter 901, Statutory Notice, is used for E&G tax cases, and is available on ACDS through APGolf.

When generating Letter 901 through APGolf, the TCS will make the following selections:

Form 4089, Notice of Deficiency - Waiver, is used as a summary page to the notice of deficiency and must be located as the first page of the notice of deficiency statement.

When preparing Form 4089, the TCS will make the following entries:

This subsection provides instructions to the assigned TCS for preparing estate or gift tax computations for a notice of deficiency. Use Form 3614-A for estate tax cases and Form 3615-A for gift tax cases.

Each adjustment must be accompanied by an explanatory paragraph.

The ATE, not the TCS, should draft the explanatory paragraphs for E&G tax notices of deficiency. The ATE should consult the Notice of Deficiency Procedures For Estate & Gift Tax Cases Work Aid, which is available on the E&G Appeals web page.

The explanation of adjustments must be computer-generated using Form 886-A, Explanation of Items. Once the ATE has drafted the explanatory language, TCS may assist in formatting Form 886-A for presentation with the computations.

For estate tax cases, use Form 3229, Computation of Credit for Tax on Prior Transfers, to explain adjustments stemming from IRC 2013.

For gift tax cases, explanatory paragraphs for adjustments to Taxable Gifts for Prior Periods are necessary. The adjustments made to Taxable Gifts for Prior Periods, along with the related explanations, should be included as a separate attachment to the notice of deficiency.

See IRM Exhibit 8.7.4-3 for an example of the explanation of adjustments in a gift tax notice of deficiency. In this example, the earlier year (2006) does not result in a deficiency, because the increase in tax is offset by a corresponding increase in the unused applicable credit amount.