Chief Counsel's Written Determinations, Service Center Advice 1998-001 to 1998-054

Taxpayer-specific rulings or determinations are written memoranda furnished by the IRS National Office in response to requests by taxpayers under published annual guidelines. Technical advice memoranda are written memoranda furnished by the National Office of the IRS upon request of a district director or chief appeals officer pursuant to annual review procedures. Chief Counsel advice are written advice or instructions prepared by the Office of Chief Counsel and issued to field or service center employees of the IRS or Office of Chief Counsel.

It is important to note that pursuant to 26 USC § 6110(j)(3), such items cannot be used or cited as precedent.

SCA 1998-054(PDF, 35K)	7/8/1998
Issue: Is a complete Form 1040 or 1040A (hereinafter collectively referred to as "Form 1040") with an addition to an otherwise effective penalties of perjury statement, considered a return for tax purposes?
SCA 1998-053(PDF, 12K)	7/29/1998
Issue: Whether a complete Form 1040 with an attachment to an otherwise effective penalties of perjury statement is a valid return for federal tax purposes.
SCA 1998-052(PDF, 12K)	8/11/1998
Issue: Whether, in determining the amount of earned income credit available to a taxpayer, the Service can disregard reported net earnings from self-employment based upon lack of substantiation or failure to keep proper records.
SCA 1998-051(PDF, 21K)	7/20/1998
Issue: Whether a U.S. Postal Service Certificate of Mailing (Form 3817) is an acceptable method to prove the date of mailing a tax return for purposes of the timely mailing treated as timely filing provisions of I.R.C. § 7502.
SCA 1998-050(PDF, 38K)	9/28/1998
Issues: (1) When an accrual basis nonTEFRA S corporation files a Form 4136 claiming a credit for certain uses of gasoline and diesel fuel under I.R.C. § 34, is the statute of limitations with respect to a shareholder extended for any adjustments resulting from this claim? (2) If the shareholder refuses to file, or does not file, an amended Form 1040 reflecting the adjustment, may the credit be denied or only a net amount be paid to the S corporation? (3) What action may be taken to ensure proper reporting of the shareholder of the adjustment caused by the granting of the credit?
SCA 1998-049(PDF, 15K)	9/17/1998
Issue: Whether amounts received for services performed in a work release program or while at a halfway house are earned income for purposes of the EIC.
SCA 1998-048(PDF, 21K)	10/13/1998
Issues: Situation (1) If a mother, X, with modified adjusted gross income (MAGI) of $10,001, her daughter, Y, with MAGI of $10,000, and one granddaughter, Z, lived together for the entire 1995 taxable year: (a) Who can claim the earned income tax credit (EIC) under section 32 of the Code? What if their MAGI’s are reversed? (b) Does a taxpayer have to claim the EIC with respect to an individual who satisfies sections 32(c)(3)(A)(i), (ii), and (iii) of the Code? (c) How should the Service treat similar factual situations in light of Lestrange v. Commissioner, T.C. Memo. 1997-428? Situation (2) If two sisters, A and B, lived together in 1995 with their respective foster children, C and D: (a) Can each sister claim the EIC under section 32 of the Code? (b) If one sister has a higher MAGI, does section 32(c)(1)(C) of the Code operate to disallow the EIC to the other sister?
SCA 1998-047(PDF, 14K)	4/29/1998
Issue: Whether the Service may abate interest accruing from the date the Service sends the taxpayer a notice stating an incorrect amount due to fully satisfy the taxpayer's liability (including interest and penalties) to the date the Service sends the taxpayer a notice stating the correct amount.
SCA 1998-046(PDF, 6K)	4/24/1998
Issue: Where on the Form W-2 are make-up contributions pursuant to USERRA to be reported.
SCA 1998-045(PDF, 14K)	4/23/1998
Issue: May CSC mail to a taxpayer a deficiency notice containing less information than that generated under the Report Generating Software (RGS) program?
SCA 1998-044(PDF, 11K)	4/21/1998
Issues: (1) If a single parent dies when the year is more than one half over, is the personal representative of the deceased taxpayer entitled to claim the earned income credit (EIC) on the taxpayer’s final income tax return based on a child who lived with the deceased taxpayer until the taxpayer’s death? (2) If a single parent dies before the year is one half over, is the personal representative of the deceased taxpayer entitled to claim the EIC on the taxpayer’s final income tax return based on a child who lived with the deceased taxpayer until the taxpayer’s death? (3) If a single parent dies before the year is one half over, is the grandparent with whom the child lived after the parent’s death entitled to claim the EIC based on that child?
SCA 1998-043(PDF, 16K)	4/17/1998
Issue: Whether backup withholding is appropriate when a payee describing itself as a "pure trust organization" refuses to provide a taxpayer identification number (TIN) to the payor.
SCA 1998-042(PDF, 20K)	4/10/1998
Issues: (1) How must the Service process returns on which credits are claimed based on false Form W-2s and/or overstated dependency exemptions and earned income credit (EIC)? (2) May these false or fraudulent credits be properly moved to the Excess Collections File? (3) If the Service reverses the information as reported on the return and moves the frozen refund to the "excess collections" file, is the Service required to notify the taxpayer since this is not an agreed assessment? (4) If the taxpayer asks for a refund, must the refund be allowed?
SCA 1998-041(PDF, 36K)	4/3/1998
Issues: (1) Whether two unmarried individuals, each living with their own dependent children in a shared dwelling, can each claim head of household filing status? (2) What expenses should be considered in determining whether each taxpayer furnished more than one-half the cost of maintaining a household? (3) What constitutes acceptable verification of expenses for the cost of maintaining a household?
SCA 1998-040(PDF, 27K)	4/2/1998
Issue: The Service Center wishes to clarify the manner in which a taxpayer may request abatement of the assessment of a mathematical or clerical error, under § 6213(b)(2)(A) of the Internal Revenue Code.
SCA 1998-039(PDF, 24K)	4/1/1998
Issues: (1) When the IRS receives duplicate Forms 1099-C reporting cancellation of indebtedness for each person with joint and several liability on an indebtedness, should the IRS treat the full amount of the indebtedness cancelled as income to each separate taxpayer? Should the IRS treat this situation in a manner similar to the way the IRS deals with responsible persons under § 6672 of the Internal Revenue Code? Should the IRS change its instructions to third parties who provide the IRS with Form 1099-C information? (2) When the IRS receives Forms 1099-C reporting cancellation of indebtedness for guarantors or sureties of a debt, must the IRS treat the full amount of the debt cancelled as income to each surety or guarantor? Should the IRS treat this situation in a manner similar to the way the IRS deals with responsible persons under § 6672? Should the IRS change its instructions to third parties who provide the IRS with Form 1099-C information? (3) When applying the insolvency test of § 108(d), should a taxpayer's interest in a pension plan that is exempt from creditor’s claims be included as an asset, and if so, how should that interest be valued? (4) Under the particular facts described below, is issuance of a Form 1099-C appropriate? (5) Should the IRS issue Forms 1099-C when cancelling tax debt of individuals discharged in a bankruptcy case or as a result of an offer in compromise under § 7122? (6) Should an entity required to report under § 6050P subtract the proceeds of a foreclosure sale, settlement, etc. from the total debt in arriving at the amount of debt cancelled for Box 2 of Form 1099-C?
SCA 1998-038(PDF, 13K)	3/13/1998
Issue: How should an individual sign on Form 872, Consent to Extend the Time to Assess Tax, relating to that individual’s tax return?
SCA 1998-037(PDF, 14K)	2/25/1998
Issue: Whether police officers performing police-type services while off-duty should be presumed to be employees for federal employment tax purposes with respect to the income earned while off-duty.
SCA 1998-036(PDF, 22K)	2/4/1998
Issue: If a notice of deficiency might not be mailed on the date specified on the face of the notice (the "notice date"), is it preferable for the notice date to be earlier or later than the date stamped by the post office on the certified mailing list (the "mailing date")?
SCA 1998-035(PDF, 21K)	1/29/1998
Issues: (1) How should the Service process returns claiming the status of married filing jointly received after the time to elect that filing status has passed? (2) How should the Service proceed if a nonfiler shows agreement with examination results by paying the liability shown in the examination report, but the nonfiler does not sign the report or file a return? What is the effect if the individual later files a joint return? (3) Should the Service agree to a change in filing status from married filing jointly to married filing separately if the taxpayer does not provide any reason for the change or if one of the taxpayers has been participating in illegal activity?
SCA 1998-034(PDF, 9K)	1/21/1998
Issue: Whether information provided in a Form 8300 Currency Transaction Report (CTR) provides an adequate basis for issuing a notice of deficiency for unreported income.
SCA 1998-033(PDF, 12K)	12/3/1997
Issue: Should the Examination and service center functions of the National Office develop procedures governing the processing of amended returns given to revenue agents to ensure that amounts which are reflected on such returns and which are due and owing are ultimately assessed?
SCA 1998-032(PDF, 24K)	8/10/1998
Issues: (1) Does the disallowance of an earned income credit (EIC) under § 32 of the Internal Revenue Code result in a statutory deficiency? (2) May the civil fraud penalty under § 6663 of the Code be asserted when a fraudulent EIC claim is made? (3) Assuming the civil fraud penalty under § 6663 can be asserted when a fraudulent EIC claim is made, how is the amount of the underpayment determined when the correct tax is zero and the Service has not issued a refund of the falsely claimed EIC? How is the amount of the underpayment determined when the Service has issued a refund?
SCA 1998-031(PDF, 22K)	1/23/1998
Issues: (1) Does the disallowance of an earned income credit (EIC) under § 32 of the Internal Revenue Code result in a statutory deficiency? (2) May the civil fraud penalty under § 6663 of the Code be asserted when a fraudulent EIC claim is made? (3) Assuming the civil fraud penalty under § 6663 can be asserted when a fraudulent EIC claim is made, how is the amount of the underpayment determined when the correct tax is zero and the Service has not issued a refund of the falsely claimed EIC? How is the amount of the underpayment determined when the Service has issued a refund?
SCA 1998-030(PDF, 17K)	8/5/1998
Issue: Whether the acceptance of an amended return and assessment of any additional tax arising therefrom constitutes a settlement agreement, thereby causing a conversion of partnership items to nonpartnership items and triggering the application of I.R.C. § 6229(f).
SCA 1998-029(PDF, 17K)	12/7/1998
Issue: Whether adjustments resulting from a settlement of partnership items may be assessed against a partner that did not file its income tax return more than one year after the date of settlement of the partnership items.
SCA 1998-028(PDF, 16K)	10/21/1998
Issues: (1) Is interest on a tax refund computed under section 6611(e)(1) or section 6611(e)(3) of the Code if the tax return shows a balance due, but the Service issues a refund because the taxpayer made an error or errors on the return which the Service corrects? (2) Is interest on a tax refund computed under section 6611(e)(1) of the Code, section 6611(e)(3) of the Code, or both sections, if a return is filed claiming a refund, and the Service determines that the taxpayer is entitled to a larger refund than the amount claimed on the return? (3) In the case of a tax refund resulting from a Service-initiated adjustment under section 6611(e)(3) of the Code, does the interest-free period under section 6611(e)(3) include the interest-free period under section 6611(b)(2)?
SCA 1998-027(PDF, 15K)	8/19/1998
Issue: Whether a claim for refund is timely when filed within two years of the third installment payment of "additional 1993 taxes" that the taxpayer made pursuant to § 13201(d) of the Omnibus Budget Reconciliation Act of 1993 [hereinafter "the Act"], 1993-3 C.B. 47.
SCA 1998-026(PDF, 27K)	8/31/1998
Issues: (1) If an employee makes a repayment of salary that was received by the employee and includible in gross income in a prior year, whether the repayment of salary reduces gross income and wages in the year of repayment. (2) Whether the repayment of salary in a year subsequent to the year of receipt creates an overcollection and overpayment of FICA taxes for the year of receipt of the original salary payment, and whether a refund or credit of the FICA taxes may be claimed by the employer. (3) What is the effect of a repayment of salary in one year of salary received in a prior year in reporting on Form W-2, Wage and Tax Statement, for the year in which the repayment is made and for the prior year in which the erroneous salary was originally received. (4) If wage repayments made by an employee to an employer for erroneous wage payments made in a prior tax year are included in gross income in the year of receipt, what is the impact of § 1341 on the amount of the taxpayer's income in the year of repayment?
SCA 1998-025(PDF, 18K)	12/4/1998
Requesting the following advice: 1. Whether it is legally appropriate for the Service to receive the proceeds from abandoned checks payable to the Service from the State of Florida. 2. Whether all states should turn over such proceeds to the Service. 3. Whether the Service can request information, such as the Taxpayer Identification Number, from the banks which turned over the abandoned checks to the State of Florida. 4. Whether these proceeds should be applied to the taxpayer’s account, deposited in “excess collections” or transferred to Account 2300.
SCA 1998-024(PDF, 42K)	5/12/1998
Issues: (1) When a taxpayer omits over 25% of gross income on an original return, but corrects that omission on a timely amended return -- that is, an amended return filed by the return due date (original or extended, as the case may be) -- is the assessment period 3 years, under § 6501(a), or 6 years, under § 6501(e)? (2) When a taxpayer files a fraudulent return, followed by a timely nonfraudulent amended return, is the assessment period 3 years, under § 6501(a), or unlimited, under § 6501(c)(1)?
SCA 1998-023(PDF, 12K)	1/28/1998
Issue: Whether to redetermine a deficiency mailed more than 90 days from the issuance of a first notice of deficiency, but within 90 days from the issuance of a second notice of deficiency is timely for purposes of I.R.C. § 6213(a).
SCA 1998-022(PDF, 8K)	12/4/1997
Issue: What is the appropriate valuation method to determine the fair market value of used automobiles donated for purposes of determining charitable contribution deductions?
SCA 1998-021(PDF, 16K)	10/3/1997
Issue: Whether section 6064 creates an irrebuttable or conclusive presumption that an individual whose name is "signed" to a return actually signed the return.
SCA 1998-020(PDF, 15K)	7/24/1998
Issue: May an individual or entity not required to file a Form 1099-C under section 6050P of the Internal Revenue Code nevertheless voluntarily file such a form?
SCA 1998-019(PDF, 11K)	2/20/1998
Issue: When a tax payment is received from a taxpayer after the period of limitation for collection has expired, can the payment be left in the account for the expired period?
SCA 1998-018(PDF, 27K)	2/11/1998
Issues: (1) How much of a joint overpayment is an injured spouse entitled to receive when all of the income and withholding is the separate management and control community property of the injured spouse? (2) How much of the joint overpayment is the injured spouse entitled to receive when all of the income and withholding is the separate management and control community property of the liable spouse? (3) Are the computations in 1 and 2 any different depending on whether the offset is being made under § 6402(a), 6402(c), or 6402(d)? (4) How is self-employment tax allocated in computing injured spouse claims? (5) How is the earned income credit allocated in computing injured spouse claims? a. Is it allocated according to who earned the income or allocated to who is the parent of the child? b. Is the earned income credit joint or separate management and control community property? c. Since married taxpayers filing separately cannot claim the earned income credit and the earned income credit is a negative tax and not a payment of tax, how should their respective tax liabilities be computed? (6) In computing each taxpayer’s share of the tax liability, should separate management and control community property be allocated fifty percent to each spouse or allocated to who earned it? How should withholding credits be allocated? Bathrick v. I.R.S., 1 BR 428, 430 (Bankr. S.D. Tex. 1979). (7) Is the computation in paragraph 6 any different depending on whether the offset is being made under §§ 6402(a), 6402(c), or 6402(d)? (8) Does the Internal Revenue Service have the same offset rights with respect to § 6402(c) as it has with respect to § 6402(a)? (9) Does the Service have the same offset rights with respect to § 6402(d) as it has with respect to § 6402(a)?
SCA 1998-017(PDF, 22K)	12/17/1997
Issue: When a refund direct deposit is made to the wrong bank account through no error on the part of the taxpayer, what means are available to the Service to recover the incorrectly deposited sums and to insure that the taxpayer receives the refund to which he/she is entitled?
SCA 1998-016(PDF, 20K)	11/17/1997
Issue: Is a return that omits certain taxpayer identification numbers (TINs) relating to the earned income credit or the dependency exemption filed in processible form for the purposes of § 6611(h) of the Code? Specifically, if a return does not contain TINs for either the taxpayer, the taxpayer's spouse, the taxpayer's qualifying child, or the taxpayer's dependent is the return filed in processible form under § 6611(h)?
SCA 1998-015(PDF, 17K)	12/24/1997
Issues: (1) Does the Internal Revenue Service (IRS) have the authority to credit accrued interest on an overpayment, as well as the overpayment itself, against an underpayment for a subsequent taxable year? (2) Does the GATT legislation’s reduction in the rate of interest applicable to the "excess portion" of a corporate overpayment (the portion in excess of $10,000) apply only to the excess portion of an overpayment outstanding on GATT’s effective date (January 1, 1995) or does it also apply to the interest that accrued on such excess portion prior to January 1, 1995? (3) Does the GATT legislation’s reduction in the rate of interest applicable to the excess portion of a corporate overpayment apply if the overpayment is credited against an underpayment for another taxable year, rather than refunded to the taxpayer?
SCA 1998-014(PDF, 17K)	4/24/1997
Issue: Does the GATT amendment’s reduction in the rate of interest applicable to the "excess portion" of a corporate overpayment (the portion in excess of $10,000) apply only to the excess portion of an overpayment outstanding on GATT’s effective date (January 1, 1995) or also to the interest that accrued on such excess portion prior to January 1, 1995?
SCA 1998-013(PDF, 22K)	5/1/1998
Issue: Whether adjustments that are otherwise barred by the I.R.C. § 6501 limitation on assessment may be asserted or otherwise taken into account when making a computational adjustment to a partner's tax liability under I.R.C. § 6231(a)(6).
SCA 1998-012(PDF, 26K)	4/7/1998
Issues: (1) May an estate deduct a loss incurred on the sale of the decedent’s personal residence? (2) If an estate may deduct a loss incurred on the sale of the decedent’s personal residence, how does the estate determine its basis in the property, does the loss flow through to the beneficiary or beneficiaries, and how does the estate report the proceeds from the sale?
SCA 1998-011(PDF, 22K)	2/2/1998
Requesting advice regarding the TRA ’97 amendment to section 6621(c) of the Internal Revenue Code.
SCA 1998-010(PDF, 15K)	10/1/1997
Issue: Under what circumstances may the Service abate interest if a Service employee tells the taxpayer an incorrect amount of tax due to fully satisfy the taxpayer's liability.
SCA 1998-009(PDF, 15K)	4/3/1998
Issue: You requested our advice concerning whether a remittance is a payment or a deposit, in the context of a taxpayer’s claim for refund, when it is submitted simultaneously with a Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. Your memorandum concludes that a remittance with a Form 4868 should be regarded as a payment by Service Centers, unless the following types of facts appear in connection with the remittance: (1) the Service treated the remittance as a deposit, by for instance, placing it in a suspense account; (2) the remittance and Form 4868 is accompanied by statements or a letter indicating that such should be designated as a deposit; or (3) the facts existing at the time of the receipt of the remittance and the Form 4868 are such that the Service is aware of the taxpayer’s intent to submit a deposit, rather than a payment of tax.
SCA 1998-008(PDF, 25K)	9/5/1997
Issues: (1) A taxpayer files an amended return, which the Service Center receives on April 14, with a Schedule C reporting $10,000 nonemployee compensation income and $20,000 in expenses resulting in a net loss of $10,000. The return previously had no Schedule C. The period of limitation on assessment will expire on April 15. If the Service disagrees with the expenses, does the Service have 60 days from receipt of the document to assess the tax on the $10,000 nonemployee compensation or must the Service disallow the claim? (2) A taxpayer files an amended return, which the Service Center receives on April 14, with a Schedule C reporting an increase to income from nonemployee compensation, but failing to compute self-employment tax. Does the Service have 60 days from the receipt of the document to assess self-employment tax?
SCA 1998-007(PDF, 15K)	9/4/1997
Issues: (1) Does a tax-decreasing entry on an amended return that also contains a tax-increasing entry constitute a refund claim under § 6402 of the Code? (2) Should the Service make refunds based on the tax-decreasing entries on an amended return when there is no overpayment because of offsetting adjustments also shown on the return?
SCA 1998-006(PDF, 14K)	3/6/1998
Issues: (1) Does a pure trust file a Form 1041? (2) Are there tax requirements for a pure trust? (3) Is an employer identification number ("EIN") required for a pure trust?
SCA 1998-005(PDF, 16K)	9/17/1997
Issue: Whether the Service may refuse to issue an EIN to a trust that appears to be a potentially abusive trust as described in Notice 97-24?
SCA 1998-004(PDF, 13K)	11/14/1997
Requesting for Significant Service Center Advice Notice of Assessment (section 6303(a) Notices).
SCA 1998-003(PDF, 17K)	2/17/1998
Issue: Whether the Service can terminate an installment payment agreement for the sole reason that the taxpayer refuses to extend the collection statute of limitations?
SCA 1998-002(PDF, 13K)	7/7/1997
Issue: Whether an overpayment may be credited against a deficiency that has been prepaid by an advance payment.
SCA 1998-001(PDF, 28K)	6/12/1997
Issues: (1) If a Service Center receives an amended return with little time remaining in the period of limitation for assessment, and the amended return contains items that would increase income, may the Service Center assess the resulting tax if the amended return contains other items that would offset the increased income? (2) Can Service Centers make assessments based on amended returns received after the assessment limitation period has run, but mailed on or before the expiration date? In addition, we have considered the following issue, which is relevant to these situations: (3) If a Service Center receives an amended return containing items that would increase income, but offset by items that decrease income, is the assessment limitation period extended for up to 60 days under § 6501(c)(7)?

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1998 Chief Counsel'sWritten Determinations

1998 Chief Counsel's
Written Determinations