CCA 200914050: DOJ settlement letters bound a partner and started the assessment period

Plain-English summary

Chief Counsel explained how the Department of Justice settles partnership cases under section 6224(c). An offer letter from a partner and an acceptance letter from DOJ form a binding settlement without Forms 870 or 906. The settlement converts that partner's partnership items to nonpartnership items, removes the partner from the partnership litigation, and starts the one-year assessment period. A stipulated decision works differently because it does not convert partnership items and becomes binding only when the appeal period ends. A district court decision becomes final when its 60-day appeal period expires, rather than after the 90-day period applicable to Tax Court decisions.

Ruling snapshot

• Question: When do DOJ correspondence and a stipulated court decision bind a partner and affect the assessment period in a partnership case?
• Outcome: Advice given: exchanged offer and acceptance letters form an immediately binding settlement, while a stipulated decision becomes final only when its applicable appeal period expires.
• Key authorities: IRC §§ 6224(c), 6226(d)(1), 6230(g), 7481, and 7483.

Full text (IRS public release)

ID: CCA_2009031310005637 Number: 200914050
Release Date: 4/3/2009
Office: --------------
UILC: 6224.01-01

From: -------------------
Sent: Friday, March 13, 2009 10:00:58 AM
To: -----------------
Cc: -----------
Subject: RE: Court of Federal Claims case

DOJ enters into "settlement agreements" under section 6224(c) by having the taxpayer partner send a letter making an "offer" and by DOJ sending a counter letter constituting an "acceptance". Thus, this exchange of letters constitutes a "settlement agreement" that is independently binding on the partner, converts the settled partnership items for that partner to nonpartnership items (thereby removing that partner from the litigation under section 6226(d)(1)) and starts the one year period for assessment. DOJ does not use Forms 870 or 906 to execute settlements.

The procedure above is different from a stipulated decision which does not convert partnership items and does not become final and binding until the appeal period expires. In that regard, under section 6230(g), the "principles" of section 7481 apply to make the district court decision final when the period for appealing that decision expires. There is nothing in section 6230(g) that directly substitutes section 7483 (the 90 appeal period for Tax Court cases) to district court cases which have a 60 day appeal period. Nor is their any policy reason for doing so. A case becomes final as a practical and policy matter when it can no longer be appealed.