This subsection provides information on procedures for concluding an examination of estate and/or gift tax returns, including taxpayer rights and administrative workpapers. For case closing procedures for delinquent returns, substitute for returns (SFR) or project cases, see IRM 4.25.8, Delinquent Return and SFR Procedures and IRM 4.4.9, AIMS Procedures and Processing Instructions, Delinquent and Subsequent for Return Processing.

The IRS has the authority to conduct examinations under Title 26, Internal Revenue Code, Subtitle F – Procedure and Administration, Chapter 78, Discovery of Liability and Enforcement of Title, Subchapter A, Examination and Inspection. Additional authority for conducting examinations is contained in 26 CFR 601.105, Statement of Procedural Regulations.

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, and 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 4.25.14.11, Estate and Gift Tax, Miscellaneous Procedures, Signature Authority.

Section 3504 of RRA 98, Public Law 105-206 requires the IRS 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 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 Estate and Gift Tax Quality Measures and Analysis (QMA) 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 QMA on a quarterly basis, but ad hoc reports may be obtained monthly. The use of NQRS is explained in additional detail in IRM 4.2.8.11, National Quality Review System (NQRS) Reports.

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 Estate and Gift Tax program specific terms and definitions:

The following related resources provide guidance for case closure procedures:

Once a determination regarding adjustments to an examined return has been made, the examiner should discuss findings with the taxpayer and/or authorized representative.

Publications sent to the taxpayer(s) should always agree with the enclosures identified on the letter. Blank forms and publications available on IRS.gov should not be included when sending copies of letters, examinations reports, waivers, etc. with Letter 937, Transmittal Letter for Power of Attorney, or other cover letter sent to representatives or appointees. For example, Publication 3498, The Examination Process, should not be included with a representative or appointee’s copy of the examiner’s report transmittal cover letter.

If a change in the tax assessment or use of the applicable credit amount is proposed, or if the taxpayer otherwise has a right to appeal the findings, the examiner must issue Pub 3498, The Examination Process, to the taxpayer as an attachment to the first draft report. Issue Publication 3498 indicating the taxpayer has appeal rights when:

Prepare the applicable examination report forms as discussed in IRM 4.25.6.3, Estate and Gift Examination Report Forms, for issuance to the taxpayer.

The Notebook 6166 Calculation Module Instructions document found in the Estate and Gift SharePoint 6166 subfolder provides detailed instructions and examples for preparing an accurate IRC 6166 interest computation. Estate and Gift Campus no longer verifies IRC 6166 interest computations before case closure. Examiners can also obtain assistance from Estate and Gift Tax Notebook Super Users by submitting an OS Get Services ticket.

Estates and trusts act through their fiduciaries (e.g., executors, personal representatives, trustees, or administrators). A person acting in a fiduciary capacity is required to file Form 56, Notice of Fiduciary Relationship. See IRC 6903. These persons are generally not required to execute Form 2848, Power of Attorney and Declaration of Representative. See CFR 601.504(b). Section 2203 defines the term ‘executor’ for estate tax purposes. As such, the executor has the right to sign waivers agreeing to adjustments to the estate tax and attendant additions to tax (penalties). There are limits to the signature authority rights granted to executors, however, to the extent the statutory executor concept does not go beyond the estate tax regime established in chapter 11. A statutory executor does not have the authority to execute Form 870 to waive restrictions for assessment of income tax or to execute Form 890 to waive restrictions on assessment of gift tax or generation-skipping transfer tax. Examiners should verify the scope of the estate’s fiduciary signature authority when soliciting waiver signatures for fiduciary income tax, gift tax, generation-skipping transfer tax adjustments and additions to tax.

Prior to case closure the examiners must sign the Form 1273 for Estate Tax Return reports. Examiners do not sign Form 3233 for Gift Tax Return reports.

Verify that the correct statute date is reflected on all transcripts. Transcripts should be less than 30 days old, preferably less than one week.

Review transaction codes to ensure that the correct assessed tax is reflected on all Notebook Report Forms.

Review transcripts to determine if any of the following items need to be addressed on the Form 3198:

Within the Notebook Job Aid, select the appropriate disposal code and deploy Form 3198. Verify auto-populated items. Complete items not auto-populated, upload the document to IMS to the "closing data" case file folder and print the Form 3198 for the hard copy administrative case file.

If possible, when closing cases from the group, all related cases should be closed with the controlling, primary or key cases on the top. See IRM 4.10.9.9(3). If it is not possible to close all related cases with the key case, the Form 3198 should only list cases closing simultaneously. For example, if the primary return (key case) is closing with three out of five related returns, the upper right hand corner of the Form 3198 should only list those three related cases. The examiner should notate the Form 9984, Activity Record, that the case is being closed without related return for particular years and the reason the examiner is not closing the specified returns. Reasons for closing returns separately may include: short statutes, new appraisals obtained for subsequent years, and additional assets that need consideration.

Common disposal codes used in estate and gift tax closures include:

Create a Form 5344, Examination Closing Record, in IMS, verify auto-populated items, and print. See the Importing Closing Data Into IMS, help file in Notebook for instructions on auto-populating several of the fields discussed below.

For specific instructions on completing Form 5344 depending on type of closure, see IRM 4.25.10.3 through IRM 4.25.10.8.

For manual completion instructions, see IRM 4.4.12, Examined Closings, Surveyed Claims and Partial Assessments, and the IMS Manual, located on the Estate and Gift SharePoint.

If reported non-professional executor (executor is not in the trade or business of being an executor (for instance, an executor of a friend of relative’s estate) fees are $10,000 or over, a Form 5346, Examination Information Report, should be prepared paying close attention to the following:

The examiner must prepare and obtain group manager signatures on letters to be issued by CCP. The letters included in the case file should match the letter instructions selected on Form 3198, and be attached to Form 3198 at closing. CCP will issue the letter(s) pursuant to the letter instructions identified on Form 3198. See Exhibit 4.25.10-2, Misc. Letter Preparation Instructions, for various letter preparation instructions.

Instructions for requesting a Letter 627, Estate Tax Closing Letter are available at IRS.gov and IRM 1.35.19.16.3, Financial Accounting, User Fees, Estate Tax Closing Letters.

Prepare a 2032A Lien Package if there is a valid IRC 2032A Special Use Valuation Election. See IRM 4.25.11.2, IRC 2032A Special Use Valuation Election.

Prepare a 6166 Lien Package if there is a valid IRC 6166 Installment Payment election. See IRM 4.25.11.3, IRC 6166 Installment Payment Elections.

Verify all issues have a Uniform Issue List (UIL) Code in IMS. A UIL code for each issue is required to close the case. See IRM 4.25.1.8.6, Uniform Issue List (UIL) Codes.

Verify taxpayer information and the taxpayer’s representative information has been input in IMS.

Complete Form 9984, Examining Officer’s Activity Record, in IMS. See IRM 4.25.1.9.5, Form 9984, Activity Record, for examples of items to be recorded on the Form 9984.

Confirm all workpapers, closing documents, and tax return data have been uploaded to the Administrative Issue subfolders as follows (one subfolder within each of the following subfolders may be created):

Create a Form 5344, Examination Closing Record, in IMS, verify auto-populated items, and print.

Close the Case in IMS.

Verify the tax return is complete and intact, as originally filed.

The classification sheet or a copy of the classification folder that contains classification data for the case must be included in the closed file.

Assemble required EPD documents and workpapers using the EPD tabs (Document 12555). EPD tabs are required. See IRM 4.25.1.9, Estate and Gift Tax Exam Process and Documentation.

Add the Form 10364-A, Statute Expiration Case Notice, and/or Form 895, Notice of Statute Expiration from Notebook, as appropriate.

Refer to Exhibit 4.25.10-1 for Case File Assembly.

Include copies of final signed report and appropriate cover letters so that CCP may issue the final report.

Obtain any required manager signatures on letters and forms. A manager must sign the Penalty Approval Form if an examiner is asserting a non-statutory penalty (e.g., negligence, under-valuation, gross-undervaluation, etc.).

Any return closed from an Estate and Gift Tax group before assignment to an examiner and before contact with the taxpayer is considered a survey before assignment. Employees will carry out this duty in accordance with Policy Statement 1-236, Fairness and Integrity in Enforcement Selection. See IRM 1.2.10.37.

Group managers should survey returns before assignment if no examination is warranted or if the number of returns assigned to the group exceeds the number that can be examined and processed within the examination cycles.

Returns surveyed before assignment are closed with Disposal Code 31. Apply a Survey Before Assignment stamp on the front of the return. Paperless procedures for closing a case as a survey before assignment are located in IRM 4.4.21.5, Examining Process, AIMS Procedures and Processing Instructions, Non-Examined Closures and Deleting AIMS Records, Surveys.

Examiners who survey a case after assignment will use Form 3187, Survey After Assignment, to explain the reasons for the survey decision, or include a complete written explanation in the Form 9984, Activity Record, and the appropriate workpapers. To complete the Form 3187:

Complete Form 5351, Examination Non-Examined Closings. Use the Status EGC label if available. If the label is not available, enter the TIN, MFT, Tax Period, Name Control, and enter Requester, EGC and Date in the area provided at the top of the form.

Create and complete Form 3198. See IRM 4.25.10.2.4, except for the differences noted below:

Apply the "Survey After Assignment" stamp to the face of the return. Sign, date, and forward the case to the group manager for signature.

Examiners who survey a case after assignment will use Form 3187, Survey After Assignment, to explain the reasons for the survey decision, or include a complete written explanation in the Form 9984, Activity Record, and the appropriate workpapers.

Create and complete Form 3198. See IRM 4.25.10.2.4, except for the differences noted in the table below:

Create and complete Form 5344. See IRM 4.25.10.2.5, for completion instructions, except for the differences noted below:

If the taxpayer does not agree with the adjustments in Estate Tax cases where the determination is No Change with Adjustments:

If the taxpayer does not agree with the adjustments in gift tax cases with a determination of No change with Adjustment:

IRC 7477 and 26 CFR 301.7477-1 authorizes and provides procedures for a taxpayer to seek declaratory relief from tax court when disagreeing with adjustments to gift tax returns that do not result in additional assessments of tax or penalties.

Upon receipt of Letter 950-G, the taxpayer must file a formal protest to request an Appeals conference. IRC 7477 requires that the taxpayer exhaust all administrative remedies before the case can be reviewed by the tax court. A formal protest must include the following language: Under the penalties of perjury, I declare that I examined the facts stated in the protest, including any accompanying documents, and, to the best of my knowledge and belief, they are true, correct and complete. The other requirements for filing a formal protest are explained in Pub 3498, The Examination Process. IRM 4.25.10.7.3, provides additional instructions for the issuance of Letter 950-G and procedures for closing the unagreed case to Appeals.

In situations where the donor does not respond to the preliminary determination letter, or expressly declines to participate in the Appeals process, the examiner should close the unagreed case to Technical Services. Technical Services will issue Letter 3569. If a donor does not respond to a preliminary determination letter, or if a donor does not participate in the Appeals process, the Tax Court will likely consider the donor to have failed to exhaust administrative remedies. In such cases, the IRS may challenge any allegation in the donor’s petition to tax court for an IRC 7477 declaratory judgment that the donor has exhausted all administrative remedies.

If there is insufficient time left on the statute of limitations and the donor does not consent to the extension of the gift tax return statute of limitations the examiner may close the case to Technical Services for issuance of Letter 3569. A taxpayer’s decision to consent or not consent to the extension of a statute of limitations date does not result in a donor failing to exhaust administrative remedies.

See IRM 4.25.10.2.4, IRM 4.25.10.2.5, IRM 4.25.10.7.3 and IRM 4.25.10.7.4 for Form 3198 and Form 5344 completion instructions.

As a prerequisite for acceptance of an unagreed case by Appeals through the issuance of a 30-Day letter, there must be a certain amount of time remaining on the statute of limitations when initially received by Appeals:

If there is sufficient time to issue a 30-Day letter after the taxpayer communicates disagreement with the proposed adjustments, the manager should consider all the facts and circumstances involved with the return, including but not limited to the following factors, to determine whether a 30-Day letter should be issued:

If there is insufficient time remaining on the statute of limitations to send a 30-Day letter when the taxpayer communicates disagreement with the proposed adjustments, a Notice of Deficiency must be prepared in accordance with the current procedures set forth in IRM 4.8.9, Statutory Notice of Deficiency.

For cases requiring review and approval of Area Counsel, the Statutory Notice Letter must be submitted to Area Counsel with at least 60 days remaining on the statute for approval of the Statutory Notice Letter. Area Counsel will return the case to the referring individual for forwarding to the Technical Services reviewer within 45 days of receipt.

Refer to Notice of Deficiency Procedures for Estate and Gift Tax Cases: A Work Aid, for detailed guidance on Statutory Notice Letter procedures, requirements, time frames and model paragraphs. The Work Aid is stored on the Estate and Gift SharePoint.

The examiner will assemble three packages as described in paragraphs four through six and submit them to the group manager for review. Technical Services will review and mail the packages.

Package ONE for Taxpayer:

Package two for POA:

Package THREE for the File:

A Form 706-GS(D) Statutory Notice Letter package should contain the following:

Create and complete Form 3198. Refer to IRM 4.25.10.2.4, except for the differences noted below:

Create and complete Form 5344. Refer to IRM 4.25.10.2.5, except for the differences noted below:

Examiners may determine that a deficiency or no change with adjustments case should be sent to Technical Service and placed into suspense. Technical Services will hold the suspended case and monitor the statute of limitations while awaiting the settlement of the same or similar issue in a case that is pending before the courts, or headquarters guidance.

Examination Technical Services holds cases pending a court decision or business unit guidance. For cases held in 1254 suspense pending a court decision, the facts in the case to be suspended must be so similar to those in the pending case that a decision in one will ultimately decide the other. Cases may be held in 1254 suspense under the following circumstances:

The examiner must discuss any case being considered for 1254 suspense with their group manager. The group manager must contact their area Examination Technical Services function to determine whether the case meets the criteria for 1254 suspense. The 1254 suspense criteria are:

See IRM 4.8.2.10, Suspense Cases, for additional guidance. Signature authority for placing a case in suspense using Form 1254, is located in Delegation Order SBSE-1-23-30.

For the agreed report, create a Form 3198 and Form 5344. See IRM 4.25.10.2.4 and IRM 4.25.10.2.5 for basic completion instructions, differences for the agreed portion of the case are noted in the two tables below:

The agreed portion must be assessed prior to closing the unagreed case. Fax the following to CCP to get the partial agreement assessed:

CCP will stamp the Form 5344 with "Request Completed" and fax a copy back to the group. Retain the copy in the case file.

For the unagreed report, create a Form 3198. See IRM 4.25.10.2.4 for basic completion instructions, differences for the agreed portion of the case are noted in the two tables below:

For the unagreed report create a Form 5344. See IRM 4.25.10.2.5 for basic completion instructions, differences for the agreed portion of the case are noted in the table below:

After receipt of the Request Completed Form 5344 fax from CCP, prepare the unagreed portion of the case for closure to Technical Services. Include the following:

Document the case review in Form 9984, Activity Record.

Note any reasonable delays (i.e., shipment of case, remote manager travel, etc.) from the date the case is closed to the manager to the date the case is closed from the group.

Review the completed Form 3198, Form 5344, Report, Examination File and Penalties. Refer to the "Manager’s Quality Checklist for Closing Cases" lead sheet that is available in Notebook, for details.

Review current transcripts (e.g., AMDISA, BMFOLT, BMFOLI, TXMOD and INOLES (less than 30 days old)) to confirm the accuracy of the balance on the account, all prior assessments have been acknowledged and used in computations, and to verify that the correct statute date is being utilized in all systems as well as in all reports and case closing documents.

This section provides a guide for the group manager to determine the grade levels of estate, gift and generation-skipping tax cases. The guide seeks to establish a uniform standard for financial planning, position classification, and staffing utilization. The guidelines apply to all transfer tax returns.

Four fields comprise the grade of case for estate and gift tax returns:

The guidelines may be used at any point in the examination process. Only the return information will be available at assignment. Development during the course of the examination may more fully disclose the final grade of case. Final grading factors take into account return information, as well as workpapers and the report. Thus, the final grade may differ from grade on assignment. The final grade is entered in box 32 of Form 5344.