Later combat-zone status does not undo deficiency notice

Plain-English summary

The IRS issued a notice of deficiency before learning that the taxpayer qualified for combat-zone relief under section 7508(a). Chief Counsel advised that the notice should not be withdrawn and the examination should not be undone. Section 7508(e)(2) permits the government to proceed until it ascertains that the person is entitled to the statutory benefits. The taxpayer should receive section 7508 relief going forward from the date the IRS learned of the eligibility.

Ruling snapshot

• Question: Must the IRS withdraw a notice of deficiency issued before it learned that the taxpayer qualified for combat-zone relief?
• Outcome: Advice given, the notice remains in place and relief applies going forward
• Key authorities: IRC §§ 7508(a), 7508(e)(2)

Full text (IRS public release)

ID: CCA_2015072714492917
UILC: 7508.00-00

Number: 201535017
Release Date: 8/28/2015
From: ----------------
Sent: Monday, July 27, 2015 2:49:29 PM
To: --------------------------------------------
Cc: -----------------------------------------------
Bcc:
Subject: FW: Combat Zone Question - High Priority

Hello -----------
We should not withdraw the Notice of Deficiency or in any way undo the exam. IRC
7508(e)(2) provides:

The assessment or collection of any internal revenue tax or of any liability to the
United States in respect of any internal revenue tax, or any action or proceeding
by or on behalf of the United States in connection therewith, may be made,
taken, begun, or prosecuted in accordance with law, without regard to the
provisions of subsection (a), unless prior to such assessment, collection, action,
or proceeding it is ascertained that the person concerned is entitled to the
benefits of subsection (a).

Here, the Notice of Deficiency was issued before the IRS ascertained that TP was
entitled to 7508(a) benefits. IRC 7508 benefits should be provided to TP going forward
from the date IRS ascertained that TP was entitled to those benefits.
Hope that helps. Let me know if you have further questions.

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